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27 Nov 2019

[14] Mr. and Mrs. Robinson are both over age 65 and file ajoint return. Their adjusted gross income was $26,700. TheRobinsons’ tax before credits is $10. How much can they claim as acredit for the elderly?
A. $0
B. $10
C. $(120) D. $1,125

[15] For the current year, Gannon Corporation has U.S. taxableincome of $500,000, which includes $100,000 from a foreigndivision. Gannon paid $45,000 of foreign income taxes on the incomeof the foreign division. Assuming Gannon’s U.S. income tax for thecurrent year before credits is $105,000, its maximum Foreign TaxCredit for the current year is
A. $45,000 B. $20,000 C. $21,000 D. $24,000

[16] The following information pertains to Wald Corporation’soperations for the current year:
Worldwide taxable income
U.S. source taxable income
U.S. income tax before Foreign Tax Credit
Foreign nonbusiness-related interest earned
Foreign income taxes paid on nonbusiness-related interestearned Other foreign source taxable income Foreign income taxespaid on other foreign source taxable income
$300,000 180,000 63,000
30,000
6,000 90,000
30,000
What amount of Foreign Tax Credit may Wald claim for thecurrent year?
A. $18,900 B. $24,900 C. $36,000 D. $25,200

[17] On April 1, 2018, Toni Painta hired a qualified ex-felonto perform duties related to her business. Toni paid the employee atotal of $6,500 during 2018. The employee worked a total of 800hours during the year. What is the amount Toni may claim as a workopportunity credit?
A. $0
B. $2,400 C. $2,600 D. $3,000

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14 Nov 2019
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Related questions

Explain the alternatives available to individual taxpayers in accounting for foreign taxes paid or accrued on their taxable income.

A. A taxpayer who uses the accrual method of accounting claims the foreign tax credit in the year in which the tax is? paid, no exceptions. A taxpayer who uses the cash method of accounting claims the foreign tax credit in the year in which the tax? occurs, no exceptions.

B. The U.S. Government taxes foreign source income but allows a credit for foreign income taxes paid or accrued that can exceed the amount of U.S. taxes owed on all? foreign-source income. The credit system requires that a taxpayer report the? income, file a tax?return, and apply the total credit to reduce his or her U.S. tax liability.

C. An annual election is available to individual? taxpayers, allowing them to deduct or credit any foreign income taxes that have been?paid, no exceptions. The credit system requires that a taxpayer report the? income, file a tax? return, and apply the credit to reduce his or her U.S. tax liability.

D. An annual election is available to individual? taxpayers, allowing them to deduct or credit any foreign income taxes that have been paid or accrued. Simplified reporting rules apply to taxpayers with small foreign tax credit amounts from passive income sources.?However, almost all taxpayers elect to claim the foreign tax credit.

Spartan Corporation, a U.S. corporation, reported $5.4 million of pretax income from its business operations in Spartania, which were conducted through a foreign branch. Spartania taxes branch income at 25 percent, and the United States taxes corporate income at 35 percent. (Enter your answers in dollars and not in millions of dollars.)

a. If the United States provided no mechanism for mitigating double taxation, what would be the total tax (U.S. and foreign) on the $5.4 million of branch profits?

b. Assume the United States allows U.S. corporations to exclude foreign source income from U.S. taxation. What would be the total tax on the $5.4 million of branch profits?

c. Assume the United States allows U.S. corporations to claim a deduction for foreign income taxes. What would be the total tax on the $5.4 million of branch profits?

d-1. Assume the United States allows U.S. corporations to claim a credit for foreign income taxes paid on foreign source income. What would be the total tax on the $5.4 million of branch profits?

d-2. Assume the United States allows U.S. corporations to claim a refundable credit for foreign income taxes paid on foreign source income. What would be your answer if Spartania taxed branch profits at 40 percent?

What is the total tax for a-d2?

1. California Cars is a U.S. manufacturer of electric cars.California Cars has $5 billion of U.S. taxable income—$4 billion ofwhich is U.S.-source income and $1 billion of which isforeign-source income. California Cars faces a U.S. tax rate of 35%and paid foreign taxes of $280 million. The firm’s foreign sourceincome falls in the general basket. It is the first year ofCalifornia Cars’ foreign operations, so don’t worry about foreigntax credit carryforwards or carrybacks.

a. What is California Cars’ foreign tax credit, and what is itsworldwide tax paid for the year?(please provide formulas)

CHECK FIGURE: $1,750


Formula Answer
US tax before FTC=
FTC=min=
US tax after FTC=
Worldwide Tax

b. Now suppose that California Cars engaged in tax-reductionstrategies abroad, reducing its foreign taxes to $200 million butholding all else constant. What is California Cars’ foreign taxcredit, and what is its worldwide tax paid for the year?

Formula Answer
US tax before FTC
FTC=min=
US tax after FTC=
Worldwide tax=
Does This tax strategy affect the firms worldwide taxburden? (Answer here)

c. What possible benefit might California Cars receive fromreducing its foreign taxes paid in part b?

In particular, suppose that the foreign country in whichCalifornia Cars operates is likely to enact a dramatic increase inits tax rate next year.

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