Which of the following statements about the foreign tax credit is true?

Question

Quizplus · Accepted Answer

The foreign tax credit allows U.S. corporations to reduce their U.S. tax liability on foreign source income by the amount of foreign taxes paid on that income. This does not defer U.S. tax on foreign source income, as stated in option A. Option B is incorrect, as the foreign tax credit is only available to U.S. corporations, not foreign corporations. Option C is also incorrect, as the foreign tax credit is allowed for certain types of foreign taxes but not all. Option D is the correct choice, as it accurately describes the purpose of the foreign tax credit, which is to avoid double taxation on foreign source income and relinquish U.S. taxing jurisdiction on that income to the extent it is taxed by a foreign jurisdiction.

Which of the Following Statements About the Foreign Tax Credit