Determine the amount of branch profits in us dollars

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Question: Brown Corporation has an affiliate in France (Brun SA) that sells products manufactured at Brown's factory in Columbia, South Carolina. In the current year, Brun SA earned €10 million before tax. Assume that the effective tax rate Brun SA pays in France is 30 percent. French taxes were paid at the end of the year. Cash distributions to Brown Company were made on July 1 and December 31 in the amount of €1 million each. Relevant exchange rates for the current year are as follows:

January 1. . . . . . . . .   €1 = $1.025

July 1. . . . . . . . . . . . €1 = $0.900

Average. . . . . . . . . .  €1 = $0.925

December 31. . . . . . .  €1 = $0.980

Required: a. Assuming that Brun SA is organized as a branch, determine the amount of branch profits in U.S. dollars that Brown Corporation must include in its U.S. taxable income and the available tax credit.

b. Assuming that Brun SA is organized as a subsidiary determine the amount of foreign source income in U.S. dollars that Brown Corporation must include in its U.S. taxable income and the available tax credit.

Reference no: EM131705823

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