Canco, a Canadian resident corporation, holds a 50% common share interest in two foreign subsidiaries. Both subsidiaries were incorporated in 2003. Canco was issued the shares at the time of incorporation. Subsidiary A is located in the United States and is a furniture manufacturer earning 100% business income. Subsidiary B is located in Guatemala and produces textiles used by Subsidiary A. In its December 31, 2016 taxation year end. Subsidiary A paid a dividend of C$60,000 to Canco. Subsidiary A withheld tax at 5% from the dividend. Subsidiary A pays tax at a rate of 18% on its earnings. In the same year. Subsidiary B paid a dividend of C$50,000 to Canco. Subsidiary B withheld tax at 10% from the dividend. Subsidiary B pays tax at a rate of 5% on its earnings. Subsidiary B had a taxable surplus balance of C$500,000 on December 31, 2015.

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How will the dividends be treated for tax purposes by Canco? Assume that only active business income has been earned by both subsidiaries since incorporation and both subsidiaries have been profitable each year since incorporation. Unrelated, non-resident persons own the other 50% of shares of each company.