question archive Polka Corporation is a 100 percent owned Polish subsidiary of Pierogi Inc
Polka Corporation is a 100 percent owned Polish subsidiary of Pierogi Inc
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Polka Corporation is a 100 percent owned Polish subsidiary of Pierogi Inc., a U.S. corporation. During the current year, Polka paid a dividend of €421,250 to Pierogi. The dividend was subject to a withholding tax of €26,250. Assume an exchange rate of €1 = $1.50. Pierogi reported U.S. taxable income of $1,200,000,
a. Compute Pierogi's net U.S. tax liability for the current year.
b. Compute excess FTC, if any.
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Answer:
A)
Witholding Tax=€26250
Exchange Rate €1=$1.5
Witholding Tax in Dollar=26250*1.5=$39375
Tax Rate=21%
Dividend=€421250
Dividend in Dollar=421250*1.5==$631875
Taxable Income-Dividend Income=Net Taxable Income
$1200000-$631875==$568125
Tax Liability=568125*.21==$119306
B) No FTC is available.
