Mega, Inc, a U Mega Paid $20,000 Income Tax to Country M

Mega, Inc., a U.S. multinational, has pretax U.S. source income and foreign source income as follows. $$\begin{array} { l r } \text { U.S. source income } & \$ 760,000 \\\text { Foreign source income--Country M } & \underline { 80,000 } \\\text { Total } & \$ 840,000\end{array}$$ Mega paid $20,000 income tax to Country M. Mega has a $25,000 foreign tax credit carryforward. What is Mega's U.S. tax liability if it takes the foreign tax credit?

A) $265,600
B) $240,600
C) $285,600
D) $258,400

Correct Answer:

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