Domestic corporation-manufactures and sells widgets

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USAco, a domestic corporation, manufactures and sells widgets in the U.S. and worldwide through its two wholly-owned foreign subsidiaries. USAco’s Hong Kong subsidiary, HKco, earns $100,000 of foreign-source income from sales in Hong Kong and pays $20,000 in foreign income taxes. USAco’s Canadian subsidiary earns $100,000 of foreign-source income from sales in Canada and pays $40,000 in foreign income taxes. HKco distributes a dividend of $60,000 to USAco but CANco does not distribute a dividend. USAco earns $100,000 of U.S.-source income from selling widgets in the U.S. Calculate USAco’s U.S. tax liability. How would your answer to question number 4 above change if USAco received a dividend distribution of $60,000 from CANco instead of Hkco?

Reference no: EM131014082

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