Ch21_SSol - Problem 21.1 U.S. taxation of foreign-source...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Problem 21.1 U.S. taxation of foreign-source income a. What is the total tax payment, foreign and domestic combined, for this income? b. What is the effective tax rate paid on this income by the U.S.-based parent company? Baseline Values Case 1 Case 2 a Foreign corporate income tax rate 28% 45% b U.S. corporate income tax rate 35% 35% c Foreign dividend witholding tax rate 15% 0% d U.S. ownership in foreign firm 100% 100% e Dividend payout rate of foreign firm 100% 100% Foreign Subsidiary Tax Computation 1 Taxable income of foreign subsidiary $3,400,000 $3,400,000 2 Foreign corporate income tax (952,000) (1,530,000) 3 Net income available for distribution $2,448,000 $1,870,000 4 Retained earnings - - 5 Distributed earnings 2,448,000 1,870,000 6 Distribution to U.S. parent company 2,448,000 1,870,000 7 Withholding taxes on dividends 367,200 - 8 Net remittance to U.S. parent $2,080,800 $1,870,000 U.S. Corporate Tax Computation on Foreign-Source Income 9 Dividend received (before withholding)
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.
Ask a homework question - tutors are online