S Parent Corporation That Receives a Dividend from a Wholly-Owned

question 29

True/False

S. parent corporation that receives a dividend from a wholly-owned foreign subsidiary that pays a 45% income tax to its home country typically does not owe any U.S. tax on the dividend.

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Definitions:

Trade Credit

A type of commercial financing in which a buyer is allowed to purchase goods or services and pay the supplier at a later scheduled date.

Commercial Paper

An unsecured, short-term debt instrument issued by corporations to finance their immediate cash flow needs.

Spontaneous Financing

Refers to funding that occurs naturally as a firm's operations grow, such as trade credit that increases with sales.

Accrual Liabilities

Obligations that a company has incurred, for which invoices have not yet been received or payment has not been made.