Kilps,a U.S.corporation,receives a $200,000 dividend from a 20% owned foreign corporation.The deemed-paid taxes attributable to this dividend are $40,000 and foreign taxes withheld on remittance of the dividend are $30,000.Kilps's U.S.tax liability before the FTC is $350,000,the gross dividend income is $240,000,and Kilps's worldwide taxable income is $1 million.Kilps's foreign tax credit for the taxable year is:

Question

Quizplus · Accepted Answer

Kilps can claim a foreign tax credit for both the deemed-paid taxes and foreign taxes withheld. The total foreign taxes paid is $70,000 ($40,000 deemed-paid taxes + $30,000 foreign taxes withheld). The foreign tax credit is limited to the lesser of the foreign taxes paid or the U.S. tax liability on the foreign source income, which is $240,000 (the gross dividend income). Since Kilps's worldwide taxable income is $1 million, the foreign tax credit is not limited by the taxable income limit. Therefore, Kilps's foreign tax credit for the taxable year is $70,000.

Kilps,a US