Giant Corporation (a U.S. corporation) forms Small Corporation in a foreign country. Giant owns...

Question:

Giant Corporation (a U.S. corporation) forms Small Corporation in a foreign country. Giant owns 70% of Small Corporation's stock and the remaining stock is owned by citizens of the country in which Small is located. This year Small Corporation earns $1,500,000 of taxable income from its manufacturing operations and pays $200,000 in taxes to the foreign country in which it is located. Small does not make any dividend distributions.

How much of Small Corporation's taxable income will be subject to U.S. income tax this year?

Taxable income:

The income of the individual or corporate on which the tax liability is computed earned during the year and computed after deducting the qualified expenses from the gross income is referred as taxable income.

Answer and Explanation:

The taxable income of Small Corporation for U.S. income tax liability amounts to zero.

Since, Small Corporation did not distributed the income earned...

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How to Calculate Corporate Taxable Financial Income

from Accounting 202: Intermediate Accounting II

Chapter 8 / Lesson 2
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