Reference no: EM133108716

Question - Boston Beanery, a U.S.-based company, establishes a branch in Great Britain in January of Year 1, when the exchange rate is US $ 1.30 per British pound (£). During Year 1, the British branch generates £ 5,000,000 of pretax income. On October 15, Year 1, £ 2,000,000 is repatriated to Boston Beanery and converted into U.S. dollars. Assume the effective income tax rate in Great Britain is 19 percent. Taxes were paid in Great Britain on December 31, Year 1. Relevant exchange rates for Year 1 are provided here (US $ per £):

January 1: 1.30

Average: 1.4

October 15: 1.45

December 31: 1.5

Assume a U.S. tax rate of 21 percent.

Required - Determine the amount of U.S. taxable income, U.S. foreign tax credit, and net U.S. tax liability related to the British branch (all in U.S. dollars).