Wallack,Inc. ,a U.S.corporation,owns 100% of Orion,Ltd. ,a foreign corporation.Orion earns only general limitation income.During the current year,Orion paid Wallack a $5,000 dividend.The § 902 credit associated with this dividend is $3,000.The foreign jurisdiction requires a withholding tax of 10%,so Wallack received only $4,500 in cash as a result of the dividend.What is Wallack's total U.S.gross income reported as a result of the $4,500 cash dividend received?

Question

Quizplus · Accepted Answer

Wallack's total U.S. gross income includes the cash dividend received ($4,500) plus the § 902 credit ($3,000), totaling $7,500. However, the question asks for the gross income reported, which includes the gross-up for the withholding tax. The gross dividend before withholding tax is $5,000, and adding the § 902 credit of $3,000 results in $8,000.