Stockholm Imports Inc.,a U.S.multinational,received a $500,000 dividend from its foreign subsidiary.The subsidiary paid $112,000 foreign income tax with respect to this dividend.Stockholm's U.S.tax rate is 34%.If Stockholm has no other foreign source income,compute its deemed paid foreign tax credit.

Question

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The deemed paid foreign tax credit is the amount of foreign taxes paid by the subsidiary that can be credited against the U.S. tax liability. Here, the subsidiary paid $112,000 in foreign taxes, which is the amount Stockholm can claim as a foreign tax credit.