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 $840,000 (the 21% marginal tax rate applies). Jaime's current year FTC is $87,500.

Question

Quizplus · Accepted Answer

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

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