Amber, Inc., a domestic corporation receives a $150,000 cash dividend from Starke, Ltd.Amber owns 15% of Starke.Starke's E & P is $2 million and it has paid foreign taxes of $1 million attributable to that E & P.What is Amber's gross income related to the Starke dividend?

Question

Quizplus · Accepted Answer

Amber's gross income includes the cash dividend received plus the foreign taxes deemed paid. The dividend is $150,000, and the foreign taxes attributable to the dividend are $75,000 ($1 million x 15% ownership). Therefore, Amber's gross income is $225,000 ($150,000 + $75,000).