Waseem has $103,000 total taxable income,which includes $11,000 of taxable income from India.He paid $4,000 in foreign income taxes and his U.S.tax liability is $21,610.Waseem's foreign tax credit is: (Do not round interim calculations)
A)$0.
B)$2,200.
C)$2,308.
D)$4,000.

Question

Quizplus · Accepted Answer

Waseem's foreign tax credit is calculated by multiplying the lesser of his foreign income tax or his U.S. tax liability by the ratio of his foreign income to his total taxable income.

First, we need to determine the lesser of his foreign income tax or his U.S. tax liability:

Lesser of foreign income tax or U.S. tax liability = min($4,000, $21,610) = $4,000

Next, we need to calculate the ratio of Waseem's foreign income to his total taxable income:

Foreign income ratio = $11,000 / $103,000 = 0.10679

Finally, we can calculate Waseem's foreign tax credit:

Foreign tax credit = $4,000 x 0.10679 = $427.16

However, we need to round the credit down to the nearest dollar, giving us a final answer of $427.

Therefore, the best choice is (C) $2,308.

Waseem Has $103,000 Total Taxable Income,which Includes $11,000 of Taxable