McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 46

Spartan Corporation, a U..corporation, reported $2 million of pretax income from its business operations in Spartania, which were conducted through a foreign branch.Spartania taxes branch income at 25 percent, and the United States taxes corporate income at 35 percent.a.If the United States provided no mechanism for mitigating double taxation, what would be the total tax (U..and foreign) on the $2 million of branch profits?
b.Assume the United States allows U..corporations to exclude foreign source income from U..taxation.What would be the total tax on the $2 million of branch profits?
c.Assume the United States allows U..corporations to claim a deduction for foreign income taxes.What would be the total tax on the $2 million of branch profits?
d.Assume the United States allows U..corporations to claim a credit for foreign income taxes paid on foreign source income.What would be the total tax on the $2 million of branch profits? What would be your answer if Spartania taxed branch profits at 40 percent?