Jokar Inc., a U.S. multinational, began operations this year. Jokar had pretax U.S. source income and foreign source income as follows. Jokar paid $50,000 income tax to Country O. Compute Jokar's U.S. tax liability if it takes the foreign tax credit.

Question

Jokar Inc., a U.S. multinational, began operations this year. Jokar had pretax U.S. source income and foreign source income as follows.  Jokar paid $50,000 income tax to Country O. Compute Jokar's U.S. tax liability if it takes the foreign tax credit.

Quizplus · Accepted Answer

The U.S. tax liability can be calculated as follows:

US source income = $7,000,000
Foreign source income = $3,000,000

Total taxable income = US source income + Foreign source income - Foreign tax credit
= $10,000,000 - $50,000
= $9,950,000

Tax on $9,950,000 = $204,000

Therefore, the correct answer is choice (C), $204,000.

Jokar Inc, a U