Use the information to answer the following question(s).
Green Valley 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 15.1.If the U.S.has no bilateral trade agreement with the host country,what is the total amount of income taxes Green Valley Exporters will pay?
A) $25,000
B) $35,000
C) $51,250
D) $60,000

Question

Quizplus · Accepted Answer

Green Valley Exporters will pay $25,000 to the host country (25% of $100,000). The U.S. will tax the income at 35%, which is $35,000. However, the U.S. allows a foreign tax credit for the $25,000 already paid, so the additional tax owed to the U.S. is $10,000 ($35,000 - $25,000). The total tax paid is $25,000 + $10,000 = $35,000.

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