When excess tax credits go unused,the foreign tax liability for a branch is greater than the corresponding U.S.tax liability when the foreign income tax rate is greater than the U.S.rate.Calculate the total tax liability for a wholly-owned subsidiary when excess tax credits cannot be used in a country given:

Question

Quizplus · Accepted Answer

Without more specific information, we cannot calculate the total tax liability directly. However, we can use the provided information to determine that the total tax liability is greater than the U.S. tax liability. Therefore, we can eliminate answer choices A and B, which suggest that the total tax liability is equal to or less than the U.S. tax liability. The correct answer is either C or D. To determine which one is correct, we need more specific information about the tax rates and how the excess tax credits are being treated. Without that information, we cannot determine the correct answer with certainty. However, answer choice C is closer to the maximum possible tax liability (i.e., 100% of the foreign income) than answer choice D, so it is the better choice.

When Excess Tax Credits Go Unused,the Foreign Tax Liability for a Branch