Waltz, Inc., a U.S. taxpayer, pays foreign taxes of $50,000 on foreign-source general basket income of $90,000.
Waltz's worldwide taxable income is $450,000, on which it owes U.S. taxes of $94,500 before FTC. Waltz's FTC is
$50,000.

Question

Quizplus · Accepted Answer

Waltz's Foreign Tax Credit (FTC) would not be the full $50,000 without considering the limitation based on the ratio of foreign-source income to worldwide taxable income. The FTC limitation would be calculated as ($90,000 / $450,000) * $94,500 = $18,900. Therefore, Waltz can claim up to $18,900 as a credit, not the full $50,000 paid.