Emerald Corporation is a 100 percent owned Irish subsidiary

Emerald Corporation is a 100 percent owned Irish subsidiary of Shamrock, Inc., a U.S. corporation. Emerald had earnings and profits of $3,937,500 and paid foreign taxes of $525,000 in the current year. During the current year, Emerald paid a dividend of $787,500 to Shamrock. The dividend was characterized as general category income for FTC purposes. The dividend was subject to a withholding tax of $39,375. Shamrock reported U.S. taxable income of $1,000,000 not including the dividend. Shamrock\'s U.S. tax rate is 34 percent. Compute Shamrock\'s U.S. tax before the foreign tax credit, net U.S. tax liability for the current year, and any excess FTC.

1-U.S. tax before the FTC ?

2-Net U.S. tax liability after the FTC ?

3-Excess FTC carryforward ?

Solution

1. As shamrock reported that US taxable income is $1000000 the US tax before the CTC will be 34% of $1000000= $340000 as divided received from 100% subsidiary is exempt from tax.