A U.S. parent corporation that receives a dividend from a wholly-owned foreign subsidiary that pays a 45% income tax to its home country typically does not owe any U.S. tax on the dividend.

Question

Quizplus · Accepted Answer

The U.S. parent corporation would receive a foreign tax credit for the income tax paid by the foreign subsidiary, which would offset the U.S. tax liability on the dividend. Therefore, the U.S. parent corporation would not owe any U.S. tax on the dividend.

A US Parent Corporation That Receives a Dividend from a Wholly-Owned