Coffin Corporation, a domestic corporation, owns 80% of TRT, a foreign corporation. Coffin's pro-rata share of TNT's post-1986 undistributed earnings is $9,000,000 of which $7,500,000 is cash or cash equivalents . Coffin's tax for the current year is:

Question

Quizplus · Accepted Answer

Coffin Corporation is required to include in its taxable income its pro-rata share of TRT's post-1986 undistributed earnings under the Subpart F rules. The pro-rata share of earnings is $9,000,000, of which $7,500,000 is cash or cash equivalents, which are considered "investment in U.S. property" and subject to current taxation. The taxable income for Coffin Corporation will be:

$7,500,000 (cash and cash equivalents)
× 80% (Coffin's ownership interest in TRT)
× 21% (current U.S. corporate tax rate)

= $1,260,000

Therefore, the answer is C) $1,282,500, which includes the $22,500 tax on the remaining $1,500,000 of TRT's earnings that are not cash or cash equivalents.

Coffin Corporation, a Domestic Corporation, Owns 80% of TRT, a Foreign