Non-exclusive license of foreign patents

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BlueCo is a US corporation with multiple business activities. On January 1, 2009, BlueCo granted a non-exclusive license of foreign patents to Rosso Ltd., an unrelated foreign corporation. On January 1, 2009, BlueCo also acquired a 5-percent interest in BianCo, a manufacturing corporation organized under the laws of Switzerland. The remaining 95% of the stock of BianCo is owned by an unrelated Swiss corporation. In addition, on January 1, 2009, BlueCo established a sales branch in Germany to handle foreign sales of the products BlueCo manufactures in the United States. All income (or loss) of the branch is sourced in Germany.

BlueCo's income in 2009 was composed of the following items:
-BlueCo received royalties from the license to Rosso of $100,000, which were subject to an Industrian withholding tax of forty percent.
-BlueCo's German sales branch received $100,000 of sales income, on which it paid German corporate income tax of $45,000.
-BlueCo received interest income from BianCo of $150,000 which was subject to a Swiss withholding tax of 10%.
-BlueCo had $700,000 of taxable income from its US operations all sourced in the United States.

Assume that the U.S. tax rate is 35%. How much foreign tax will BlueCo be allowed to credit for 2009? How much tax would be due in the U.S.?

Reference no: EM13277105

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