Kiwi Corporation Is a 100 Percent Owned Australian Subsidiary of Exotic

question 19

Short Answer

Kiwi Corporation is a 100 percent owned Australian subsidiary of Exotic Fruit Corporation,a U.S.corporation.Kiwi had post-1986 earnings and profits of 1,000,000 Australian dollars (AUD)and post-1986 foreign taxes of $225,000.During the current year,Kiwi paid a dividend of 250,000 AUD to Exotic Fruit.Assume an exchange rate of 1 AUD = $0.75.No withholding tax was imposed on the dividend.What amount of taxable income does the dividend generate on Exotic's U.S.tax return?

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Definitions:

International Trade

International trade involves the exchange of goods, services, and capital across international borders or territories, facilitating global economic integration.

Exchange Rates

The price of one currency in terms of another, influencing international trade and investment.

Government Stabilization

The efforts and policies implemented by a government to stabilize the economy, often through interventions in financial markets.

Exchange Rate Risk

The risk that the value of an investment will decrease due to changes in the relative values of different currencies.