Amber, Inc., a domestic corporation receives a $150,000 cash dividend from Starke, Ltd.Amber owns 15% of Starke.Starke's 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

Amber's foreign tax credit is limited to the amount of foreign taxes paid by Starke that are attributable to the dividend received by Amber. The dividend received by Amber is $150,000, and Starke's E & P is $2 million. Therefore, the portion of Starke's foreign taxes that are attributable to the dividend received by Amber is $150,000 / $2,000,000 * $1,000,000 = $75,000.