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. treated the taxes paid on income earned in the host country as a tax-credit, then Rogue River's total U.S. corporate tax on the foreign earnings would be
A) $51,250.
B) $35,000.
C) $26,250.
D) $10,000.

Question

Quizplus · Accepted Answer

The U.S. tax on $100,000 at 35% is $35,000. The foreign tax credit is $25,000 (25% of $100,000). Therefore, the U.S. tax after the credit is $35,000 - $25,000 = $10,000.

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