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Chapter 4 (105-140) Cases 2010

Chapter 4 (105-140) Cases 2010 - International Taxation...

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International Taxation Deemed Foreign Tax Credit Cases Read Chapter 4 (pp. 105-140) Case 1 Q, Inc. is a U.S. corporation based in Houston. Throughout the current year, it owned all the outstanding stock of King Corporation, a foreign corporation. King had the following income, taxes paid, and dividends distributed for current year: §902(c)(1) type accumulated profits $10,000,000 Foreign taxes paid “on or with respect to accumulated profits” 4,000,000 Dividends paid to Q, Inc. 3,000,000 a. What is the total amount of gross income that Q, Inc. must recognize with respect to the foreign dividend if it elects to claim the foreign tax credit? b. What is the amount of foreign taxes deemed paid by Q, Inc.? Case 2 United Bearings, Inc. is a domestic corporation. It owns 40% of the stock of GrayTech Corporation, a European corporation based in Italy. As of December 31, GrayTech had the following E&P and foreign tax balances: Earnings & Profits (post-1986) $13,000,000 Post-1986 foreign taxes paid 5,500,000 GrayTech paid a $5,000,000 dividend on December 31. United Bearings received $2,000,000 of this amount.
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