Suppose a foreign subsidiary earns $2 million after paying foreign income taxes of $500,000.If the subsidiary retains all of its earnings,what is the amount of the indirect foreign tax credit that its parent will receive?
A)$500,000
B)$250,000
C)$400,000
D)it receives no foreign tax credit

Question

Quizplus · Accepted Answer

The indirect foreign tax credit is available to the parent company only when the earnings are repatriated (distributed as dividends). If the subsidiary retains all of its earnings, the parent company does not receive any foreign tax credit.

Suppose a Foreign Subsidiary Earns $2 Million After Paying Foreign