Performance,Inc. ,a U.S.corporation,owns 100% of Krumb,Ltd. ,a foreign corporation.Krumb earns only general limitation income.During the current year,Krumb paid Performance a $200,000 dividend.The § 902 credit associated with this dividend is $30,000.The foreign jurisdiction requires a withholding tax of 30%,so Performance received only $140,000 in cash as a result of the dividend.What is Performance's total U.S.gross income reported as a result of the $140,000 cash dividend received?

Question

Quizplus · Accepted Answer

Performance's total U.S. gross income includes the cash dividend received ($140,000) plus the foreign taxes deemed paid ($30,000), resulting in a total of $170,000. However, the question asks for the total U.S. gross income reported, which includes the gross-up for the withholding tax. Therefore, the total U.S. gross income is $230,000 ($140,000 cash received + $30,000 § 902 credit + $60,000 withholding tax).