Carlotta has $50,000 foreign- source income and $150,000 worldwide income. Her U.S. tax on her worldwide income is $30,290, and she paid foreign taxes of $16,000. What is the Carlotta's foreign tax credit?

Question

Quizplus · Accepted Answer

The foreign tax credit is calculated as the lesser of the foreign taxes paid ($16,000) or the U.S. tax on the foreign-source income. The U.S. tax on the foreign-source income is calculated as ($50,000 / $150,000) * $30,290 = $10,097. Therefore, the foreign tax credit is $10,097.

Carlotta Has $50,000 Foreign- Source Income and $150,000 Worldwide Income