Hickman,Inc.,a U.S.corporation,operates an unincorporated branch manufacturing operation in the United Kingdom.Hickman,Inc.,reports $900,000 of taxable income from the U.K.branch on its U.S.tax return along with $1,300,000 of taxable income from its U.S.operations.Hickman paid $270,000 in U.K.income taxes related to the $900,000 in branch income. Assuming a U.S.tax rate of 35%,what is Hickman's U.S.tax liability after any allowable foreign tax credits?

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The U.K.branch income is $900,000 and the U.S.operations income is $1,300,000.Accordingly,the total U.S.taxable income is $2,200,000.The U.S.tax on this amount is $770,000 ($2,200,000 F1F1F1S1F1F1F10 35%).The U.K.branch income is all general limitation basket income.The FTC limit in this basket is $315,000.Because the actual foreign income taxes are $270,000,Hickman is not limited.Accordingly,Hickman's net U.S.tax liability is $500,000 ($770,000 - $270,000).Note that the $270,000 FTC is fully creditable without limitation because the effective foreign tax rate is less than the U.S.rate (35%).