A U.S. citizen accrued $120,000 of creditable foreign taxes last year. The citizen's foreign tax credit limitation for last year is $90,000 (only a single limitation need be calculated). The excess foreign tax credit limitation for the year preceding the year in which the excess foreign taxes were incurred is $2,000. A similar $2,000 excess foreign tax credit limitation position is expected in each of the next 10 years. What portion of the excess foreign taxes can be expected to be noncreditable because of the foreign tax credit limitation?

Question

Quizplus · Accepted Answer

The excess foreign taxes are $30,000 ($120,000 - $90,000). With a $2,000 excess limitation available from the previous year and $2,000 expected for each of the next 10 years, $22,000 ($2,000 x 11) can be credited, leaving $8,000 noncreditable.

A US Citizen Accrued $120,000 of Creditable Foreign Taxes Last Year