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USCo, a C corporation, owns FORco, a foreign corporation. On December 31, 2017, FORco has $5...

USCo, a C corporation, owns FORco, a foreign corporation. On December 31, 2017, FORco has $5 million of earnings and profits, $2 million of which are attributable to cash or cash equivalents. What is the amount of the transition tax (a/k/a Deemed Repatriation Regime)?

Question 22 options:

1)

 $0.

2)

 $400,000.

3)

 $775,000.

4)

 $550,000.
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Answer #1

Ans:4:$550,000 is Correct Answer

2000,000*15.5%=$310,000

3000,000*8%=$240,000

Total=$550,000

Explanation:

As Per Provisions of IRS 965

Foreign earnings held in the form of cash and cash equivalents are taxed at a 15.5 percent rate, and the remaining earnings are taxed at an 8 percent rate. The transition tax generally may be paid in installments over an eight-year period .


Hope this helped ! Let me know in case of any queries.

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