_____ Pindax owns 100% of the outstanding common stock of Sindax, a foreign subsidiary located in a country having a 25% income tax rate and a 5% dividend withholding tax. For 2006, Sindax reported net income of $300,000 and paid dividends of $300,000. Pindax's income tax rate is 40%. What amount should Pindax report for deferred income taxes payable in its balance sheet at 12/31/06?
A) $ -0-
B) $5,000
C) $10,000
D) $15,000
E) $45,000

Question

Quizplus · Accepted Answer

Since Sindax is a foreign subsidiary and Pindax owns 100% of it, the dividends received are not subject to additional U.S. tax due to the dividends received deduction. Therefore, no deferred income taxes are payable.

_____ Pindax Owns 100% of the Outstanding Common Stock of Sindax