Mark,Inc.,a U.S.corporation,operates an unincorporated branch manufacturing operation in Germany.Mark,Inc.,reports $100,000 of taxable income from the German branch on its U.S.tax return along with $400,000 of taxable income from its U.S.operations.Mark paid $40,000 in German income taxes related to the $100,000 in branch income. Assuming a U.S.tax rate of 35%,what is Mark's U.S.tax liability after any allowable foreign tax credits?

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The German branch income is $100,000 and the U.S.operations income is $400,000.Accordingly,the total U.S.taxable income is $500,000.The U.S.tax on this amount is $175,000 ($5000,000 F1F1F1S1F1F1F10 35%). The German branch income is all general limitation basket income.The FTC limit in this basket is $35,000.Because the actual foreign income taxes are $40,000,Mark,Inc.,is limited.Accordingly,Mark's net U.S.tax liability is $140,000 ($175,000 - $35,000).

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