Isle Co, a corporation of Islandia, is engaged in the production and sale of musical recordings and operates a branch in Miami. The branch's "U.S. net equity" was $1,000,000 as of the end of 2011. During 2012, the Miami branch had taxable income effectively connected with a U.S. trade/business of $1,000,000 and a U.S. income tax liability of $350,000. During 2012, the corporation purchased a new recording studio in Miami for $500,000. At the end of 2012, the branch's "U.S. net equity" was $1,300,000. The Miami branch remitted $200,000 in cash to the head office in Islandia on September 30, 2012.

What, if any, is the dividend equivalent amount for 2012?

How would your answer change if the "U.S. net equity" of the branch was $1,650,000 at the end of 2012? How much tax would be owed?

Answer rating: 100% (QA)

Net equity at the end of 2012 1300000 Income tax liability 350000 Cas... View the full answer