Brian and Clara paid $4,350 in foreign income taxes to Mexico.Their total income was $105,000,which included $16,000 of foreign income.Their U.S.tax liability is $22,750.How much can Brian and Clara claim as foreign tax credit?

Question

Quizplus · Accepted Answer

The foreign tax credit is limited to the amount of U.S. tax liability attributable to foreign-source income. In this case, Brian and Clara's U.S. tax liability is $22,750 and they earned $16,000 of foreign income. Therefore, the maximum foreign tax credit they can claim is $16,000.

The total amount of foreign income taxes they paid to Mexico was $4,350. However, since their U.S. tax liability is higher than the foreign income they earned, they can only claim up to $16,000 as a foreign tax credit. Therefore, the answer is B) $3,467, which is the amount of foreign tax that can be credited against their U.S. tax liability.

Brian and Clara Paid $4,350 in Foreign Income Taxes to Mexico.Their