Entity Country Percent Activity Income Income Dividend Net amount
Owned before tax tax rate withholding received by
$millions tax rate parent $mil.
USIC US ----- Manufacturing $10 35% ---- ----
A Argentina 100% Manufacturing 1 35% 0% $0.2
B Brazil 100% Manufacturing 2 34% 0% $2.5*
C Canada 100% Manufacturing 3 33% 5% $1.0
D Hong Kong 100% Investment 2 16.5% 0% $1.5
E Liechtenstein 100% Distribution 3 10% 4% $0.0
F Japan 51% Manufacturing 2 40% 5% $0.5
G New Zealand 60% Banking 4 30% 15% $1.0
*Some dividends were paid out of beginning-of-year retained earning
additional information
USIC's 10 million income before tax is derived from the production and sale of products in the us
each entity is legally incorporated in its host country other than entity A which is registered with the Argentinian government as a branch
entities A, B C, and F produce and market products in their home countries
entity D makes passice investments in stocks and bonds in the hong kong financial markets, income is derived solely from dividends and interest
entitiy E markets goods purchased from USIC. of E's sales 95% are made in Austria Germany and Switzerland and 5% are made in Liechtenstein
Entity G operates in the financial services industry in New Zealand
Required:
a. determine the amount of us taxable income for each entity A-G
b. determine the foreign tax credit allowed in the US first by basket then in total
c. determine the net US tax liability
d. determine any excess foreign tax credits (identify by basket)