Saginaw Steel Corporation has a precredit U.S. tax of $105,000 on $500,000 of taxable income in 2018. Saginaw has $200,000 of foreign source taxable income and paid $60,000 of income taxes to the German government on this income. All of the foreign source income is treated as foreign branch income for foreign tax credit purposes. Saginaw's foreign tax credit on its 2018 tax return will be:

Question

Quizplus · Accepted Answer

The foreign tax credit is limited to the lesser of $60,000 or the FTC limitation, computed as $200,000/$500,000 × $105,000 = $42,000.

Saginaw Steel Corporation Has a Precredit U