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25 February, 11:25

Pierre Corporation has a precredit U. S. tax of $315,000 on $1,500,000 of taxable income in the current year. Pierre has $300,000 of foreign source taxable income characterized as foreign branch income and $150,000 of foreign source taxable income characterized as passive category income. Pierre paid $60,000 of foreign income taxes on the foreign branch income and $15,000 of foreign income taxes on the passive category income. What amount of foreign tax credit (FTC) can Pierre use on its current U. S. tax return and what is the amount of the carryforward, if any

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  1. 25 February, 14:38
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    Foreign tax credit = $75,000

    Carry forward balance = 0

    Explanation:

    As per the data given in the question,

    Precredit U. S. tax = $315,000

    Taxable income = $150,000

    Foreign source = $300,000

    Foreign source taxable income = $150,000

    Paid = $60,000

    Foreign income tax = $15,000

    Pierre can have foreign credit tax = $60,000 + $15,000

    =$75,000 whereas carry forward amount is zero
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