Performance,Inc.,a U.S.corporation,owns 100% of Krumb,Ltd.,a foreign corporation.Krumb earns only general basket income.During the current year,Krumb paid Performance a $200,000 dividend.The foreign tax credit associated with this dividend is $30,000.The foreign jurisdiction requires a withholding tax of 30%,so Performance received only $140,000 in cash as a result of the dividend.What is Performance's total U.S.gross income reported as a result of the $140,000 cash received?

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The $200,000 dividend received by Performance from Krumb is included in Performance's gross income. However, Performance is allowed to claim a foreign tax credit of $30,000 for the foreign withholding tax paid by Krumb. This means that Performance's taxable income from the dividend is $170,000 ($200,000 - $30,000). Since Performance only received $140,000 in cash, it must reduce its basis in Krumb to reflect the remaining $30,000 of income. Therefore, Performance's total U.S. gross income reported is $230,000 ($200,000 + $30,000 adjustment to basis).