Suppose a Foreign Subsidiary Earns $2 Million After Paying Foreign

question 20

Multiple Choice

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

---

Definitions:

Duress

A situation where someone acts against their will or is forced into an agreement or decision under pressure or threat.

Improper Threat

A form of coercion that is illegitimate or unethical, used to induce another party to act in a manner they otherwise would not.

Assertion

An assertive declaration of truth or conviction.

Mutual Mistake

A legal concept where both parties involved in a contract have a misunderstanding about an essential fact of the agreement, potentially making the contract voidable.