Amber, Inc., a domestic corporation receives a $150,000 cash dividend from Starke, Ltd. Amber owns 15% of Starke. Starke's post-1986 E & P is $2 million and it has paid foreign taxes of $1 million attributable to that E & P. What is Amber's foreign tax credit related to the Starke dividend?

Question

Quizplus · Accepted Answer

The calculation of Amber's foreign tax credit related to the Starke dividend is as follows:

Foreign tax credit = foreign taxes paid / post-1986 E & P x dividend received
Foreign tax credit = $1 million / $2 million x $150,000 x 15%
Foreign tax credit = $75,000

Therefore, the correct answer is D) $75,000.