Night, Inc. a domestic corporation earned $300,000 from foreign
manufacturing activities on which it paid $90,000
of foreign income taxes. Night's foreign sales income is taxed at a
50% foreign tax rate. What amount of foreign sales
income can Night earn without generating any excess FTCs for the
current year? Assume a 34% tax rate.
Particulars |
Amount ($) |
Foreign tax income |
300000 |
Income tax paid |
90000 |
Since income is taxed at 50% rate thus, the assessable foreign tax income |
180000 |
Actual tax liability @34% |
61200 |
Excess tax paid |
|
Income tax paid |
90000 |
Less: Actual tax liability @34% |
61200 |
Excess tax paid |
28800 |
Rate of tax |
34% |
Amount of income Night can earn without generating FCT for the current year will be: |
|
Excess tax paid |
28800 |
Amount of income without generating FCT |
84705.88 |
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