Compute dixie taxable income

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Question - Dixie Inc., a Tennessee corporation, conducts business through branch offices in the United States, Mexico, and Canada. Dixie owns 100 percent of the stock of two foreign subsidiaries, Dix-Col Inc. and Dix-Per Inc., through which it conducts its South American business. This year, Dixie recognized the following items of taxable income:

U.S. source income from domestic branch

$5,197,000

Foreign source income from foreign branches

1,187,400

Cash dividends received from Dix-Col

318,000

Cash dividends received from Dix-Per

312,500

During the year, Dixie paid $226,600 income tax to Mexico and $339,600 income tax to Canada. It paid no direct income taxes to any other foreign country. However, Dix-Col paid a 20 percent income tax to the country of Colombia, and Dix-Per paid a 37 percent income tax to the country of Peru. U.S. tax rate is 34 percent.

a. Compute Dixie's taxable income.

b. Compute Dixie's U.S. tax.

Reference no: EM132116367

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