American Company, a domestic corporation, own 100% of FORCO, a foreign corporation. During its first year of operations, FORCO derives $20 million of foreign source taxable income, pays $8 million in foreign income taxes, and distributes a $6 million dividend to American.

a. What is the deemed taxes paid.

b. Assume that in year 2, FORCO once again has $20 million of foreign-source taxable income, pays $8 million in foreign income taxes, and distributes a $6 million dividend to American. What are the balances in the following accounts for FORCO?

i. Post-1986 undistributed earnings

ii. Post-1986 foreign income taxes