Use the information to answer the following question(s).
Rogue River 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 14.1. 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 Rogue River 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

Rogue River Exporters will pay $25,000 to the host country (25% of $100,000). Under the bilateral trade agreement, the total tax should equal the highest tax rate, which is 35%. Therefore, they will pay an additional $10,000 to the U.S. to reach the 35% total tax ($35,000 total tax - $25,000 paid to the host country).

Use the Information to Answer the Following Question(s)