Brandy, a U.S. corporation, operates a manufacturing branch in Chad, which does not have an income tax treaty with the United States. Brandy’s worldwide Federal taxable income is $30 million, so it is subject to a 35% marginal tax rate. Profits and taxes in Chad for the current year are summarized as follows. Compute Brandy’s foreign tax credit associated with its operations in Chad.
|
Income Item |
Chad Income |
Chad Tax |
Chad Tax |
|
Manufacturing profits |
$2,500,000 |
20% |
$500,000 |
|
Dividend |
300,000 |
5% |
15,000 |