USCo, a U.S. corporation, reports worldwide taxable income of $500,000, including a $100,000 dividend from ForCo, a wholly-owned foreign corporation. ForCo's undistributed earnings and profits are $1 million and it has paid $200,000 of foreign income taxes attributable to these earnings. What is USCo's deemed paid foreign tax credit related to the dividend received (before consideration of any limitation)?

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The deemed paid foreign tax credit is calculated as the proportion of foreign taxes paid relative to the dividend received. ForCo paid $200,000 in foreign taxes on $1 million of earnings, so the tax rate is 20%. The dividend received by USCo is $100,000, so the deemed paid foreign tax credit is 20% of $100,000, which is $20,000.

USCo, a US