Question: Halifax Inc. operates its business in Country U through a subsidiary incorporated under Country U law. The subsidiary has never paid a dividend and has

Halifax Inc. operates its business in Country U through a subsidiary incorporated under Country U law. The subsidiary has never paid a dividend and has accumulated over $10 million after-tax earnings.
a. Country U has a 45 percent corporate income tax. Describe the tax consequences to Halifax if it receives a $5 million dividend from the subsidiary.
b. How would the tax consequences change if Country U’s corporate income tax rate is only 20 percent?

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