Seller is a U.S. online software retailer that in 2021 has $4,000,000 in gross income from sales to Country Y; of which $3,000,000 is net foreign source income (gross foreign source income less related deductions) under U.S. tax law. The U.S. has a tax treaty with Country Y; and that treaty includes a provision that says that, if the treaty allows Country Y to tax an item of gross income derived by a U.S. resident, the United States treats that item of gross income as gross income from sources within that foreign country for FTC purposes. (See ECTP 11.04[2] for a discussion of such provisions.) Seller has a permanent establishment in Country Y, and $2,500,000 of its Country Y gross income ($2,000,000 of net profits) is business profits attributable to that PE. Seller elects to apply the treaty, and pays $600,000 of Country Y tax on these net profits. On this same net income Seller pays U.S. federal income tax at a rate of 21% ($420,000). Based only on this information, Seller's foreign tax credit should be what amount? Select one: a. $420,000 b. $600,000 c. $630,000 d. $2,000,000

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The detailed answer for the above question is provided below The correct answer is c 630000 Heres ho... View the full answer