Provo Corporation, a U

question 68

Multiple Choice

Provo Corporation, a U.S. corporation, received a dividend of $350,000 from its 100 percent owned German subsidiary. A withholding taxof $35,000 was imposed on the dividend. The dividend qualifies for the 100 percent dividends received deduction. What are the U.S. tax consequences to Provo on receipt of the dividend, assuming the foreign tax credit limitation is not binding and the company breaks even on its U.S. operations?

• A)Taxable income of $350,000, net U.S. tax liability of $0, and $14,000 FTC carryforward
• B)Taxable income of $350,000, net U.S. tax liability of $20,000, and $0 FTC carryforward
• C)Taxable income of $0 and $35,000 FTC carryforward
• D)Taxable income of $0 and $0 FTC carryforward

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Definitions:

S&P/TSX 60 Index

A stock market index of 60 large companies listed on the Toronto Stock Exchange, representing leading sectors in Canada.

Stock Indices

Aggregated measures that track the performance of a basket of stocks, representing a specific market or sector, to gauge market trends.

Canadian Stock Market

The financial market in Canada where securities are bought and sold, including the Toronto Stock Exchange and the TSX Venture Exchange.

Underpricing

The practice of setting the initial offering price of a security, typically shares, below its market value, which often leads to a first-day surge in its stock price.