T, Inc., has $60,000 U.S.source income, $40,000 grossed-up foreign source income, and $16,000 foreign taxes deemed paid by T.T's foreign tax credit is

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 foreign source income. The U.S. tax on foreign source income is calculated as: ($40,000 / $100,000) * $22,250 (U.S. tax on total income) = $8,900. Therefore, the foreign tax credit is $8,900.

T, Inc, Has $60,000 U