Horton Corporation Is a 100 Percent Owned Canadian Subsidiary of Cruller

Multiple Choice

Horton Corporation is a 100 percent owned Canadian subsidiary of Cruller Corporation, a U.S. corporation. During the current year, Horton paid a dividend of C$622,500 to Cruller. The dividend qualifies for the 100 percent dividends received deduction. The dividend was subject to a withholding tax of C$36,000. Assume an exchange rate of C$1 = $1. Cruller reported U.S. source taxable income of $2,300,000 before considering the dividend received from Horton Corporation. Compute the tax consequences to Cruller as a result of this dividend.

A) Taxable income of $2,922,500, net U.S. tax of $577,725, and FTC carryover of $0
B) Taxable income of $2,922,500, net U.S. tax of $613,725, and FTC carryover of $36,000
C) Taxable income of $2,300,000, net U.S. tax of $447,000, and FTC carryover of $0
D) Taxable income of $2,300,000, net U.S. tax of $483,000, and FTC carryover of $0