Yasmin Corporation, which has a 35 percent marginal tax rate, owns 100 percent of Luna Corporation, a foreign corporation in a country with a 15 percent corporate income tax. Luna has never paid a dividend and has accumulated $18 million after-tax income (none of which is subpart F income). This year, Luna lends $1 million to Yasmin. Compute Yasmin’s constructive dividend and related tax cost as a result of this loan from Luna.
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