Lilly Inc., a calendar year U.S. corporation, owns 40 percent of the stock of Holly, Inc. a calendar year specified foreign corporation. Prior to 2018, Holly has accumulated deferred foreign earnings of $11.2 million and an aggregate foreign cash position of $1.8 million. Compute Lilly's tax liability on its mandatory inclusion amount related to its ownership of Holly.

Question

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Lilly's mandatory inclusion amount is $4.48 million (40% x $11.2 million). Lilly's tax liability is $412,400 (20% x $4.48 million).

Lilly Inc, a Calendar Year U