Madrid Corporation Is a 100 Percent Owned Spanish Subsidiary of Doubloon

Multiple Choice

Madrid Corporation is a 100 percent owned Spanish subsidiary of Doubloon Corporation,a U.S.corporation.Madrid had post-1986 earnings and profits of €4,200,000 and post-1986 foreign taxes of $2,700,000.During the current year,Madrid paid a dividend of €2,100,000 to Doubloon.Assume an exchange rate of €1 = $1.50.Compute the tax consequences to Doubloon as a result of this dividend.

A) Taxable income of $3,150,000 and a deemed paid credit of $2,700,000.
B) Taxable income of $4,500,000 and a deemed paid credit of $2,700,000.
C) Taxable income of $3,150,000 and a deemed paid credit of $1,350,000.
D) Taxable income of $4,500,000 and a deemed paid credit of $1,350,000.