Assume Adidas set up a China subsidiary to hold the Adidas trademarks, patents, and technology, at a time when the U.S. corporate tax rate was 35% and the China corporate tax rate was 0%. In that year 20xx, Adias earned $10 billion in U.S. profits (before licensing payment to subsidiary), and paid $6 billion to the China subsidiary for the right to license the Adidas Trademarks, patents, and technology. For questions 1 and 2, further assume that Adidas does not repatriate any profit from the China subsidiary to the U.S.

1. What was the total that Adias owes in U.S. income tax in year 20xx?

2. What was Adidas's total tax savings in year 20xx due to setting up the China subsidiary?

3. How much would Adidas owe in additional U.S. taxes if it repatriated the China profits back to the U.S. (when the U.S tax rate was 35%)?