QuestionQuestion

A US corporation has a 100% owned foreign corporation subsidiary in Germany.
The US Corporation has US source taxable income in the current year of $500,000, and authorizes a dividend of $140,000 from its German subsidiary.
The German corporation reports the following:
German source net income            $300,000
German income tax                        $(90,000)
Net income after tax                      $210,000

Assume the US Federal income tax on worldwide income is $250,000, and the German withholding tax is 10%.

Compute the corporation’s foreign tax credit after limitation, for the current year and any foreign tax carryover.

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Your foreign tax credit cannot be more than your total U.S. tax liability multiplied by a fraction....

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