What will be sombrero excess foreign tax credit

Reference no: EM133354094

Case Study: Sombrero Corporation, a U.S. corporation, operates through a branch in Espania. Management projects that the company's pretax income in the next taxable year will be $122,200: $99,200 from U.S. operations and $23,000 from the Espania branch. Espania taxes corporate income at a rate of 30 percent.

Note: Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.

Question:

If management's projections are accurate, what will be Sombrero's excess foreign tax credit in the next taxable year? Assume all of the income is foreign branch income.
Management plans to establish a second branch in Italia. Italia taxes corporate income at a rate of 10 percent. What amount of income will the branch in Italia have to generate to eliminate the excess credit generated by the branch in Espania?

Reference no: EM133354094

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