Solution-What is the rate of the withholding tax on the

What is the rate of the withholding tax on the dividend

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Question - US-Cco is a United States C Corporation that is wholly-owned by FRGNco, a company incorporated in country F, which has a tax treaty with the United States similar to the United States Model Treaty. FRGNco is privately owned by six unrelated residents of Canada. FRGNco manufactures widgets and earns $500,000 of income, all from the sale of those widgets to US-Cco. US-Cco owns valuable marketing intangibles, which make its resale of the widgets extremely profitable. During the current year, US-Cco earns income of $10 million that US-Cco distributes as a dividend to FRGNco. After receiving the dividend, FRGNco pays $6 million of compensation (which is reasonable, ordinary, and necessary) to one of the Canadian individuals, who acts as FRGNco's CEO and is the brains behind the operations. What is the rate of the withholding tax on the dividend? Why?

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What is the rate of the withholding tax on the dividend

Reference no: EM132480408

Reference no: EM132480408

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