Question: Ozark MediSurge, Inc. Ozark MediSurge, Inc. of Missouri wants to set up a regular procedure for transferring funds from its newly opened manufacturing subsidiary in Korea to the United States. The precedent set by the transfer method or methods is likely to prevail over any government objections that might otherwise arise in the future. The Korean subsidiary manufactures surgical tools for export to all Asian countries. The following pro forma financial information portrays the results expected in the first full year of operations. Ozark MediSurge's CFO is pondering these approaches:
a. Declare a dividend of Won362,340,000, equal to 50% of profit after taxes. The dividend would be taxable in the United States after a gross-up for Korean taxes already paid.
b. Add a license fee of Won362,340,000 to the above expenses, and remit that amount annually. The license fee would be fully taxable in the United States.