Trikeco a domestic corporation manufactures mountain bicycles for sale both in the United States and Europe. Trikeco operates in Europe through
Trike1 a wholly-owned Italian corporation that manufactures a special line of mountain bicycles for the European market. In addition Trike1 owns 100%
of Trike2 a U.K. corporation that markets Trike1%u2019s products in the United Kingdom. At end of the current year the undistributed earnings and
foreign income taxes of Trike1 and Trike2 are as follows:
During the current year Trike2 distributed a $10 million dividend to Trike1 and Trike1 distributed a $10 million dividend to Trikeco. To simplify the
computations assume that neither dividend distributions attracted any Italian or U.K. withholding taxes and that the dividend received by Trike1 was
exempt from Italian taxation.
Compute Trikeco%u2019s deemed-paid foreign tax credit as well as the residual U.S. tax if any on the dividend Trikeco received from Trike1. Assume
the U.S. tax rate is 35%.