Question

Bismarck Corporation has a precredit U.S. tax of $210,000 on $1,000,000 of taxable income in the current year. Bismarck has $200,000 of foreign source taxable income characterized as foreign branch income and $50,000 of foreign source taxable income characterized as passive category income. Bismarck paid $80,000 of foreign income taxes on the foreign branch income and $10,000 of foreign income taxes on the passive category income. What amount of foreign tax credit (FTC) can Bismarck use on its current-year U.S. tax return and what is the amount of the carryforward, if any

Answer 1

Foreign credit tax = $90,000

Explanation :

As per the data given in the question,

Bismarck corporation has pre credit U.S. tax = $210,000

Taxable income = $1,000,000

Foreign source = $200,000

Foreign source taxable income = $50,000

Paid taxes on foreign branch income = $80,000

Paid tax on passive category income = $10,000

Bismarck can have foreign credit tax of = $80,000 + $10,000

= $90,000

and amount of carry forward would be zero