Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
Avon is a? U
Avon is a? U.S.-based direct seller of a wide array of products. Avon markets leading?beauty, fashion, and home products in more than 100 countries. As part of the training in its corporate treasury? offices, it has its interns build a spreadsheet analysis of the following hypothetical subsidiary? earnings/distribution analysis. Use the tax analysis presented below for your basic? structure
|
Baseline Values
|
Case 1
|
Case 2
|
|
|
|
a Foreign corporate income tax rate
|
28?%
|
42?%
|
||
|
b U.S. corporate income tax rate
|
38?%
|
38?%
|
||
|
c Foreign dividend withholding tax rate
|
?15%
|
?0%
|
||
|
d U.S. ownership in foreign firm
|
?100%
|
?100%
|
||
|
e Dividend payout rate of foreign firm
|
?100%
|
?100%
|
||
|
Foreign Subsidiary Tax Computation
|
||||
|
1 Taxable income of foreign subsidiary
|
?$3,200,000
|
?$3,200,000
|
||
|
2 Foreign corporate income tax
|
?(896,000?)
|
?(1,344,000?)
|
||
|
3 Net income available for distribution
|
?$2,304,000
|
?$1,856,000
|
||
|
4 Retained earnings
|
0
|
0
|
||
|
5 Distributed earnings
|
2,304,000
|
1,856,000
|
||
|
6 Distribution to U.S. parent company
|
2,304,000
|
1,856,000
|
||
|
7 Withholding taxes on dividends
|
345,600
|
0
|
||
|
8 Net remittance to U.S. parent
|
?$1,958,400
|
?$1,856,000
|
||
|
U.S. Corporate Tax Computation on Foreign Income
|
||||
|
9 Dividend received before withholding
|
?$2,304,000
|
?$1,856,000
|
||
|
10 Add back foreign? deem-paid tax
|
896,000
|
1,344,000
|
||
|
11 ? Grossed-up foreign dividend
|
?$3,200,000
|
?$3,200,000
|
||
|
12 Tentative U.S. liability
|
1,216,000
|
1,216,000
|
||
|
13 Less credit for foreign taxes
|
||||
|
a foreign income taxes paid
|
?(896,000?)
|
?(1,344,000?)
|
||
|
b foreign withholding taxes paid
|
?(345,600?)
|
?(0?)
|
||
|
c total
|
?($1,241,600?)
|
?($1,344,000?)
|
||
|
14 Additional U.S. taxes due
|
?$0
|
?$0
|
||
|
15 Excess foreign tax credits
|
25,600
|
128,000
|
||
|
16 ? After-tax income from foreign subsidiary
|
?$1,984,000
|
?$1,984,000
|
a. What is the total tax? payment, foreign and domestic? combined, for this? income?
b. What is the effective tax rate paid on this income by the? U.S.-based parent? company?
c. What would be the total tax payment and effective tax rate if the foreign corporate tax rate was 42?% and there were no withholding taxes on? dividends?
d. What would be the total tax payment and effective tax rate if the income was earned by a branch of the U.S.?corporation?
Expert Solution
Need this Answer?
This solution is not in the archive yet. Hire an expert to solve it for you.
