Translation of a Dividend. Dayton, a U.S. corporation, owns all the stock in Fiero, a foreign corporation organized in the current year. During the year, Fiero earns 400,000 pirogs of pretax profits and accrues 100,000 pirogs of Country Z income taxes. On August 25 of the current year, Fiero pays to Dayton a 150,000 pirog dividend on which 7,500 pirogs in Country Z taxes are withheld. On March 1 of the following year, Fiero pays 100% of its Country Z income taxes for the current year. Assume Dayton has no other foreign source income, and its U.S. Taxable income (excluding the dividend) is $1 million. The pirog-U.S. dollar exchange rate on various dates are as follows:
January 1 of the current year 9.0 pirogs = $1 (U.S.)
August 25 of the current year 10.0 pirogs = $1 (U.S.)
Current year average 9.5 pirogs = $1 (U.S.)
March 1 of the following year 11.0 pirogs = $1 (U.S.)
a. For U.S. tax reporting purposes, what are Dayton’s dividend and deemed paid foreign tax credit amount in U.S. dollars?
b. What is Dayton’s net U.S. tax liability as a result of the dividend?
This is in regards to foreign taxes. There is no more information available and it's the problem right out of the book.