Boca Corporation, a U.S. corporation, reported U.S. taxable income of $1,000,000 in 2018. Boca also received a dividend of $100,000 from the corporation's 100 percent owned subsidiary in Italy. The Italian government imposed a withholding tax of $5,000 on the dividend. Compute Boca Corporation's net U.S. tax liability for 2018.

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Quizplus · Accepted Answer

The dividend is eligible for the 100% dividends received deduction. The precredit U.S. tax is $210,000, computed as $1,000,000 × 21%. The withholding tax is not creditable because it is imposed on the dividend eligible for the 100% dividends received deduction.