Omaha Inc. owns 100 percent of the stock in Franco, a foreign corporation. All Francos income is

Question:

Omaha Inc. owns 100 percent of the stock in Franco, a foreign corporation. All Franco’s income is foreign source, and its foreign income tax rate is 20 percent. During its fiscal year ended June 30, 2017, Franco distributed a $50,000 dividend to Omaha.

a. Assuming that Omaha had a 35 percent marginal tax rate in 2017, compute its U.S. tax on the dividend.

b. How would your computation change if Omaha received the dividend from Franco during its fiscal year ended June 30, 2019?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...

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