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Tax consequences in the US

Horton Corporation is a 100 percent owned Canadian subsidiary of Cruller Corporation, a U.S. corporation. During the current year, Horton paid a dividend of C$603,750 to Cruller. The dividend was subject to a withholding tax of C$31,000. Assume an exchange rate of C$1 = $1. Cruller reported U.S. source taxable income of $2,050,000 before considering the dividend received from Horton Corporation. Compute the tax consequences to Cruller as a result of this dividend.

a)Taxable income of 2,707,500, net U.S. tax of 536,575, and FTC carry over of $0.

b) taxable income of 2,707,500, net US tax of 568575, and FTC carryover of 32,000.

c) taxable income of 2,100,000, net US tax of 409,000, and FTC carryover of $0.

d)taxable income of 2,100,000, net US tax of 441,000, and FTC carryover of $0.


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