Question

Weather, Inc., a domestic corporation, operates in both Fredonia and the United States. This year, the business generated taxable income of $600,000 from foreign sources and $900,000 from U.S. sources. All of Weather’s foreign- source income is in the general limitation basket. Weather’s total taxable income is $1.5 million. Weather pays Fredonia taxes of $228,000. What is Weather’s FTC for the tax year? Assume a 34% U.S. income tax rate.

Answer 1

Answer:

$204,000

Explanation:

FTC for the tax year = US Tax liability*(Foreign taxable income/Worldwide taxable income)

FTC for the tax year = ($1,500,000*34%)*($600,000/$1,500,000)

FTC for the tax year = $510,000*0.4

FTC for the tax year = $204,000

So, Weather Inc's FTC for the tax year is $204,000