Provo Corporation, a U.S. corporation, received a dividend of $350,000 from its 100 percent owned German subsidiary. A withholding tax of $35,000 was imposed on the dividend. The dividend qualifies for the 100 percent dividends received deduction. What are the U.S. tax consequences to Provo on receipt of the dividend, assuming the foreign tax credit limitation is not binding and the company breaks even on its U.S. operations?
A. Taxable income of $350,000, net U.S. tax liability of $0, and $14,000 FTC carryforward
B. Taxable income of $0 and $35,000 FTC carryforward
C. Taxable income of $0 and $0 FTC carryforward
D. Taxable income of $350,000, net U.S. tax liability of $20,000, and $0 FTC carryforward
Answer: C
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