Patty, a single taxpayer, has $100,000 of U.S. source taxable income and $300,000 of foreign source taxable income from countries X and Y for a total worldwide taxable income of $400,000. Countries X and Y levy a total of $89,000 in foreign taxes upon the foreign source taxable income. U.S. taxes before credits are $115,690. The foreign tax credit limitation is

Question

Quizplus · Accepted Answer

The foreign tax credit limitation is calculated as the ratio of foreign source taxable income to total worldwide taxable income, multiplied by the U.S. taxes before credits. Here, it is ($300,000 / $400,000) * $115,690 = $86,768.

Patty, a Single Taxpayer, Has $100,000 of U