Determine the amount of foreign tax credit by the us

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Question: Pendleton Company (a U.S. taxpayer) is a highly diversified company with wholly owned subsidiaries located in South Korea and Japan. The South Korean operation manufactures electric generators that are sold in the Asian market. It generated pretax income of $200,000 in the current year. The Japanese subsidiary is a an investment company that makes passive investments in the Japanese financial markets. The Japanese subsidiary generated pretax income of $100,000 in the current year. Both companies distribute 100 percent of aftertax income to Pendleton Company as a dividend each year. Effective income tax rates and withholding rates are provided.

Required: a. Determine the amount of foreign tax credit allowed by the United States in the current year, and the amount of excess foreign tax credit, if any.

b. Repeat requirement (a) assuming that, rather than making passive investments in Japan, the Japanese subsidiary purchases electric generators from its South Korean sister company and distributes them in Japan.

Reference no: EM131705643

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