Saginaw Steel Corporation has a precredit U.S. tax of $170,000 on $500,000 of taxable income in 2017. Saginaw has $200,000 of foreign source taxable income and paid$80,000 of income taxes to the German government on this income. All of the foreign source income is treated as general category income for foreign tax credit purposes. Saginaw's foreign tax credit on its 2017 tax return will be:

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Saginaw Steel Corporation can claim a foreign tax credit for the $80,000 of income tax paid to the German government. The maximum credit allowed would be the lesser of the foreign income tax paid ($80,000) or the U.S. tax that would be due on the foreign source income ($200,000 x 34% = $68,000). Therefore, Saginaw's foreign tax credit on its 2017 tax return will be $68,000.

Saginaw Steel Corporation Has a Precredit U