Use the information to answer the following question(s).
Green Valley Exporters USA has $100,000 of before-tax foreign income. The host country has a corporate income tax rate of 25% and the U.S. has a corporate income tax rate of 35%.
-Refer to Instruction 15.2. If the U.S. has a bilateral trade agreement with the host country that calls for the total tax paid to be equal to the maximum amount that could be paid in the highest taxing country, what is the total amount of income taxes Green Valley Exporters will pay to the host country, and how much will they pay in U.S income taxes on the foreign earned income?
A) $25,000; $10,000
B) $25,000; $26,250
C) $35,000; $0
D) none of the above

Question

Quizplus · Accepted Answer

Green Valley Exporters will pay $25,000 to the host country (25% of $100,000). Under the bilateral trade agreement, they will pay a total of $35,000 (35% of $100,000, the U.S. rate) in taxes. Therefore, they will pay an additional $10,000 to the U.S. ($35,000 total - $25,000 paid to the host country).

Use the Information to Answer the Following Question(s)