Answer:
The income tax is $81,600
Explanation:
In this question, we are asked to compute the foreign tax income for Zenon Inc assuming the foreign source income does not qualify as FDII
To compute this, we employ a mathematical approach.
Mathematically,
The income paid by Zenon Inc = Foreign credit Tax limitation * Foreign source income/taxable income
We identify the parameters in the equation as follows;
Foreign tax limitation = Taxable income * tax rate
Where the tax rate for the US is 34% or simply 0.34
Foreign tax limitation = 0.34 * 2,140,000 = $727,600
Foreign source income = $240,000
Taxable income = $2,140,000
Income paid = 727,600 * 240,000/2,140,000 = $81,600
