Three-quarters ownership of canadian partnership

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California Graphics is a U.S. corporation with $200 million of U.S.-source income and $10 million of foreign-source income. In addition, California Graphics has three-quarters ownership of a Canadian partnership that has total pretax income of $30 million, all of which are Canadian-source income and subject to a 40% Canadian tax rate. The Canadian partnership repatriates $5 million back to California Graphics in the current year. For U.S. purposes, California Graphics treats the Canadian partnership as a partnership under the check-the-box regulations.

a. How much taxable income will California Graphics report on its U.S. tax return?

b. Suppose that, instead of treating the Canadian partnership as a partnership, California Graphics elects to treat it as a corporation for U.S. purposes. How much taxable income will California Graphics report on its U.S. tax return?

Reference no: EM131259536

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