Trike1 Trike 2
Post-1986 undistributed earnings $90 million $54 million
Post-1986 foreign income taxes $54 million $27 million
During the current year, Trike2 distributed a $10 million dividend to Trike1, and Trike1 distributed a $10 million dividend to Trikeco. To simplify the computations, assume that neither dividend distributions attracted any Italian or U.K. withholding taxes, and that the dividend received by Trike1 was exempt from Italian taxation.
Compute Trikeco’s deemed paid foreign tax credit, as well as the residual U.S. tax, if any, on the dividend Trikeco received from Trike1. Assume the U.S. tax rate is 35%.
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