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$600,000 to Cruller. The dividend was subject to a withholding tax of C$30,000. Assume an exchange rate of C$1 = $1. Cruller reported U.S. source taxable income of $2,000,000 before considering the dividend received from Horton Corporation. Compute the tax consequences to Cruller as a result of this dividend.

A) Taxable income of $2,600,000,  net U.S. tax of $516,000, and FTC carryover of $0
B) Taxable income of $2,600,000, net U.S. tax of $546,000, and  FTC carryover of $30,000
C) Taxable income of $2,000,000, net U.S. tax of $390,000, and FTC carryover of $0
D) Taxable income of $2,000,000, net U.S. tax of $420,000, and FTC carryover of $0