Question

Dunne, Inc., a U.S. corporation, earned $500,000 in total taxable income, including $50,000 in foreign-source taxable income from its branch manufacturing operations in Brazil and $20,000 in foreign-source income from interest earned on bonds issued by Dutch corporations. Dunne paid $25,000 in Brazilian income taxes and $3,000 in Dutch income taxes. Compute Dunne’s U.S. tax liability after any available FTCs. Dunne’s U.S. tax rate is 21%.

Answer 1

Tax liabiury Computation after any PARTICULARS of Dunnes v.s available IT is. AMOUNT Taxable income 5,00,000 Less (50,000) Income from branch manufactuning operations in Brasil (20,000) uss! Interest on bonds earned on earned rest NET 4,30,000 Tax Total Taxable Income rate @ all [ $4,30,000 * 21.7.] 90,300 Note : - AS Donne paid $25,000 in Brazilian Income Taxes and $3,000 In Dutch Income Taxes. so the reason for deduction from the Gross taxable Income Is it becomes Double Taxation as Dunne has already been paid in Brazil and butch, The remaining balance needs to be paid in U.S.