Question

Orleans Corporation, a U.S. corporation, reported U.S. taxable income of $2,000,000. Included in the computation of taxable income was a $400,000 dividend from a 5%-owned Canadian subsidiary. A withholding tax of $8,000 was imposed on the dividend. What is Orleans’s net U.S. tax liability?

Answer 1

$420,000

Step-by-step explanation:

Calculation for Orleans’s net U.S. tax liability

Using this formula

Tax liability=Taxable income×U.S tax rate

Let plug in the formula

Tax liability=$2,000,000×21%

Tax liability=$420,000

Therefore Orleans’s net U.S. tax will be $420,000. The withholding tax amount of $8,000 was not included because it was already imposed on the dividend.