A deemed paid credit is available on which of the following dividends received by a U.S.corporation?
A) Dividend received from a 5 percent owned foreign corporation, all of the income of which is derived from an active business.
B) Dividend received from a 20 percent owned foreign corporation, all of the income of which is derived from an active business.
C) Dividend received from a 100 percent owned foreign corporation, all of the income of which is derived from an active business.
D) Both B and C are correct.

Question

Quizplus · Accepted Answer

Under U.S. tax law, a deemed paid credit is available to U.S. corporations that own at least 10% of a foreign corporation's voting stock, and which receive dividends that are attributable to the foreign corporation's earnings that have not been previously taxed by the U.S.

Option A is incorrect because the U.S. corporation owns less than 10% of the foreign corporation.

Option B is correct because the U.S. corporation owns at least 10% of the foreign corporation, and the foreign corporation earns its income from an active business.

Option C is also correct because the U.S. corporation owns 100% of the foreign corporation, so it clearly meets the ownership threshold for the deemed paid credit.

A Deemed Paid Credit Is Available on Which of the Following