Paper, a U.S. corporation, owns 40% of the stock in Sud, a foreign corporation. Sud reports earnings and profits of $200,000 (before the payment of any current dividends) and foreign income taxes of $50,000. In the current year, Sud pays a total of $90,000 in dividends to all its shareholders. It withholds from the gross dividends paid to nonresident shareholders a 15% Country T income tax.

a. What gross income amount does Paper report upon receiving the dividend?

b. To what extent is Paper's U.S. tax liability increased as a result of the dividend (assume a 34% U.S. corporate tax rate)?

c. How would your answers to Parts a and b change if the foreign income taxes instead had been $80,000?