Creditable foreign income tax-foreign tax credit limitation

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Quantco, a domestic corporation, is an engineering consulting firm that has its main offices in San Diego, California. Because Quantco does a considerable amount of business in China, it has a branch office in Beijing. During the current year, Quantco generates a total pre-tax profit of $100 million (all from active business operations), including $80 million of profits from its U.S. operations and $20 million of profits from its Chinese operations. Assume the U.S. tax rate is 35% and the Chinese rate is 40%.

A) Compute Quantco's creditable foreign income taxes, foreign tax credit limitation, and excess credits (if any).

Now assume that Quantco has a second foreing branch office in Singapore which generated $10 million of profits (all from active business operations), on which Quantco pays Singapore taxes. Assume the Singapore tax rate is 25%.

 

B) Recomputed Quantco's creditable foreing income taxes, foreing tax credit limitation and excess credits. What is the name of the phenomenon by which the Singapore profits resulted in the elimination of the excess credits of the Chinese profits?

Reference no: EM13790293

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