USCo, a domestic corporation, reports worldwide taxable income of $1,500,000, including a $300,000 dividend from ForCo, a wholly-owned foreign corporation.ForCo's undistributed earnings and profits are $15 million and it has paid $10 million of foreign income taxes attributable to these earnings.What is USCo's deemed paid foreign tax credit related to the dividend received (before consideration of any limitation)?

Question

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The deemed paid foreign tax credit is calculated by multiplying the foreign taxes paid by the ratio of the dividend received to the foreign corporation's total earnings and profits. Here, $10 million in foreign taxes multiplied by ($300,000 / $15 million) equals $200,000.

USCo, a Domestic Corporation, Reports Worldwide Taxable Income of $1,500,000