Blue sky, inc., a u. s. corporation, is a manufacturing concern that sells most of its products in the united states. it also conducts some business in the european union through various branches. during the current year, blue sky reports taxable income of $700,000, of which $500,000 is u. s.-sourced and $200,000 is foreign-sourced. foreign income taxes paid amounted to $45,000. blue sky's u. s. income tax liability is $238,000.

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Amina Chen

Business

18 May, 11:41

Blue sky, inc., a u. s. corporation, is a manufacturing concern that sells most of its products in the united states. it also conducts some business in the european union through various branches. during the current year, blue sky reports taxable income of $700,000, of which $500,000 is u. s.-sourced and $200,000 is foreign-sourced. foreign income taxes paid amounted to $45,000. blue sky's u. s. income tax liability is $238,000.

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Deshawn Stephens · Answer 1

Given:

total taxable income = $ 700,000.

US sourced income = $ 500,000.

so, foreign sourced = $ 200,000.

Income tax liability = $ 238,000.

solution:

U. S. income tax liability net of the allowable foreign tax credit = (200000/700000) * 238,000 = $ 68,000.