Rainier Corporation, a U What Amount of Creditable Foreign Taxes Does Rainier Incur

Essay

Rainier Corporation, a U.S. corporation, manufactures and sells quidgets in the United States and Europe. Rainier conducts its operations in Europe through a German GmbH, which the company elects to treat as a branch for U.S. tax purposes. Rainier also licenses the rights to manufacture quidgets to an unrelated company in China. During the current year, Rainier paid the following foreign taxes, translated into U.S. dollars at the appropriate exchange rate: $$\begin{array} { |c|c|} \hline { \text { Foreign Taxes } } & \text { Amount (in \$) } \\\hline \text { National income taxes in Germany } & 1,500,000 \\\hline \text { City of Munich income taxes } & 200,000 \\\hline \text { Value-added tax to German government } & 400,000 \\\hline \begin{array} { l } \text { Payroll tax (employer's share of social insurance } \\\text { contributions) to German government }\end{array} & 300,000 \\\hline \text { Withholding tax on royalties received from China } & 100,000 \\\hline\end{array}$$ What amount of creditable foreign taxes does Rainier incur?