Use the information to answer the following question(s).
Green Valley Exporters USA has $100,000 of before tax foreign income. The host country has a corporate income tax rate of 25% and the U.S. has a corporate income tax rate of 35%.
-Refer to Instruction 15.1.If the U.S.treated the taxes paid on income earned in the host country as a tax-credit,then Green Valley's total U.S.corporate tax on the foreign earnings would be:
A) $51,250.
B) $35,000.
C) $26,250.
D) $10,000.

Question

Quizplus · Accepted Answer

The U.S. corporate tax on foreign earnings is calculated by applying the U.S. tax rate to the foreign income and then subtracting the foreign tax credit. The U.S. tax on $100,000 at 35% is $35,000. The foreign tax credit is $25,000 (25% of $100,000). Therefore, the total U.S. tax is $35,000 - $25,000 = $10,000.

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