Gamboa's Tax Averaging. Gamboa, Incorporated, is a relatvely new US-based retailer of speciaity fruits and vegetables. The frm is vertically integrated with frut and vegetable-sourcing subsidiaries in Central America, and dstribution outets throughout the southeastern and northeastern regions of the United States. Gamboa's two Central American subsidiaries are in Belize and Costa Rica. Mara Gamboa, the daughter of the firm's founder, is being groomed to take over the firm's financial management in the near future, Like many firms of Gamboa's sze, it has not possessed a very high degree of sophistication in financial management simply out of tSme and cost cons deratons. Maria, however, has recently finished her MBA and is now attempting to put some specalized knowledge of U.S. taxation practices to work to save Gamboa money. Her first concern is tax averaging for foreign tax liabilities anising from the two Central American subs diaries. As shown in the popup window, EEB. Costa Rican operations are slightly more profitable than Belize, which is particu arly good since Costa Rica is a reatvely low-tax country. Costa Rican corporate taxes are a fat 30%, and there are no withholding taxes imposed on dividends paid by foreign ns it operations there. eize has a higher corporate come tax ate, 40% and imposes ? 10 withholdng tax on all dvidends distributed to foreign nvestors The current US corporate come tax ate s 35% Mana a era ed the a credt wo units? a. I Mana Gamboa assumes a 50% payout rate from eac subsidiar , what are the addtio al taxes due on ore gn-sourced income om Belize and Costa R a individual ? Ho m cn in additional u s taxes would be due b. Keeping the payout rate from the Bei e subsidary at 5 %, ho should Ma a change the payout ate of the Costa Rican subsidiary in order to most efficenty manage her total foreign tax bir c. What is the min mum effecove tax rate that Maria can achieve an her foreign-sourced income? abilities o the a. If Mana Gamboa assumes a 50% payout ate from each subsidiary, calculate the additonal taxes d e o excess foreign tax credits on foreign-sourced income from el e ind idually in the foto ng table ound to the nearest dolar Subsi Earnings before taxes Less corporate income taxes Net income Distrbuted earnings Less withholding taxes on dividends Net dividend remitted to U.S. parent Income Statoment Belize Costa Rica Combinod 1,900,000 (760,000) 1,140,000 570,000 (57,000) 513,000 U.S. Tax Calculation Net dividend remitted Withholding income taxes Proportion of foreign income taxes Grossed-up dividend 513,000 57,000 380,000 950,000 332,500 Theoretical U.S. tax liability Foregn tax credits 437,000 Additional U.S. tax due Excess foreign tax credits 104,500 If Maria Gamboa assumes a 0% payout ate om 0ach subada caculate the addit o al a es due orexcess regn ta c edits on or n-sourced income om Costa Rica indiv dually the olo ng table: ound to the nearest dollar. Gamboa's Tax Averaging. Gamboa, Incorporated, is a relatvely new US-based retailer of speciaity fruits and vegetables. The frm is vertically integrated with frut and vegetable-sourcing subsidiaries in Central America, and dstribution outets throughout the southeastern and northeastern regions of the United States. Gamboa's two Central American subsidiaries are in Belize and Costa Rica. Mara Gamboa, the daughter of the firm's founder, is being groomed to take over the firm's financial management in the near future, Like many firms of Gamboa's sze, it has not possessed a very high degree of sophistication in financial management simply out of tSme and cost cons deratons. Maria, however, has recently finished her MBA and is now attempting to put some specalized knowledge of U.S. taxation practices to work to save Gamboa money. Her first concern is tax averaging for foreign tax liabilities anising from the two Central American subs diaries. As shown in the popup window, EEB. Costa Rican operations are slightly more profitable than Belize, which is particu arly good since Costa Rica is a reatvely low-tax country. Costa Rican corporate taxes are a fat 30%, and there are no withholding taxes imposed on dividends paid by foreign ns it operations there. eize has a higher corporate come tax ate, 40% and imposes ? 10 withholdng tax on all dvidends distributed to foreign nvestors The current US corporate come tax ate s 35% Mana a era ed the a credt wo units? a. I Mana Gamboa assumes a 50% payout rate from eac subsidiar , what are the addtio al taxes due on ore gn-sourced income om Belize and Costa R a individual ? Ho m cn in additional u s taxes would be due b. Keeping the payout rate from the Bei e subsidary at 5 %, ho should Ma a change the payout ate of the Costa Rican subsidiary in order to most efficenty manage her total foreign tax bir c. What is the min mum effecove tax rate that Maria can achieve an her foreign-sourced income? abilities o the a. If Mana Gamboa assumes a 50% payout ate from each subsidiary, calculate the additonal taxes d e o excess foreign tax credits on foreign-sourced income from el e ind idually in the foto ng table ound to the nearest dolar Subsi Earnings before taxes Less corporate income taxes Net income Distrbuted earnings Less withholding taxes on dividends Net dividend remitted to U.S. parent Income Statoment Belize Costa Rica Combinod 1,900,000 (760,000) 1,140,000 570,000 (57,000) 513,000 U.S. Tax Calculation Net dividend remitted Withholding income taxes Proportion of foreign income taxes Grossed-up dividend 513,000 57,000 380,000 950,000 332,500 Theoretical U.S. tax liability Foregn tax credits 437,000 Additional U.S. tax due Excess foreign tax credits 104,500 If Maria Gamboa assumes a 0% payout ate om 0ach subada caculate the addit o al a es due orexcess regn ta c edits on or n-sourced income om Costa Rica indiv dually the olo ng table: ound to the nearest dollar