ACC Roosevelt University
Chapter
Omega Company has a foreign branch with the following:
In CUs Percentage
Income before income taxes
Income taxes paid to the foreign government
Sales and other taxes paid to the foreign government
Omega Company must include the foreign branch income in determining its homecountry taxable income.
The corporate income tax rate in Omega's home country
Determine whether Omega would be better off taking a deduction or a credit for foreign taxes paid.
Deduction Credit
Foreign source income
Deduction for all foreign taxes paid
Home taxable income
Income tax rate
Income tax before FTC
FTC allowed
Net home country tax liability
FTC allowed:
a Actual foreign taxes paid
b Overall FTC limitation
Should Omega take a deduction or a credit for foreign taxes paid? Explain your reasoning.
