Jenkin Corporation reported the following for its first two taxable years. Corporate tax rate schedule. Assume that the tax rates for both the years are the same.
Calculate Jenkin's U.S. tax liability for Year 2.

Question

Quizplus · Accepted Answer

Year 1 FTC $42,000 (calculated as $147,000 tax × ($200,000/700,000), resulting in a carryforward of $28,000 (Foreign tax paid Year 1 $80,000 - $42,000 Year 1 FTC).
Year 2 Tax before credit = $210,000. FTC = $50,000 + $28,000 carryforward from year 1.
 $$\begin{array} { l r r r r } 
& \text { Year 1 } & & \text { Year 2 } \
\text { U.S. source income } & \$ 500,000 & & \$ & 600,000 \
\text { Foreign source income } & 200,000 & & 400,000 \
 \text { Taxable income } & \$ 700,000 & & \$ 1,000,000 \
 \text { Foreign tax paid } & \$ 80,000 & & \$ & 50,000
\end{array}$$

Jenkin Corporation Reported the Following for Its First Two Taxable