Jaime received gross foreign-source dividend income of $250,000.Foreign taxes withheld on the dividend were $25,000.Jaime's total U.S.tax liability is $800,000 (the 35% marginal tax rate applies).Jaime's current year FTC is $87,500.

Question

Quizplus · Accepted Answer

The current year Foreign Tax Credit (FTC) is limited to the lesser of the foreign taxes paid or the U.S. tax liability on the foreign-source income. Jaime's FTC should be limited to the $25,000 of foreign taxes withheld, not $87,500.

Jaime Received Gross Foreign-Source Dividend Income of $250,000