Apache, a U.S. corporation, owns 80% of the stock in Burrito, incorporated in Country Y. Burrito reports the following results for the current year.

Gross Income

$300,000 Foreign base company sales income

$150,000 Foreign base company services income

$70,000 Dividend from Kane, a 70% owned Country Y Corporation

$280,000 Retail income earned in Country Y

Deductions

$120,000 Foreign base company sales income

$90,000 Foreign base company services income

$0 Dividend from Kane, a 70% owned Country Y Corporation

$220,000 Retail income earned in Country Y

Kane conducts substantially all its business in Country Y

a. What amount of income must Apache recognize as a result of Burrito's activities?

b. How would your answer to Part a change if Kane were instead a 70% owned Country M corporation?

c. How would your answer to Part b change if foreign base company sales income before deductions were instead $500,000?