During the year, Purple Corporation (a U.S.Corporation) has U.S.-source income of $900,000 and foreign income of $300,000.The foreign-source income generates foreign income taxes of $75,000.The U.S.income tax before the foreign tax credit is $408,000.Purple Corporation's foreign tax credit is:

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The foreign tax credit is calculated by comparing the foreign tax paid on foreign-source income to the U.S. tax on that same foreign-source income. In this case, Purple Corporation had $300,000 of foreign-source income and paid $75,000 in foreign taxes on that income. The ratio of foreign-source income to total income is ($300,000 ÷ $1,200,000) = 0.25. Therefore, the foreign tax credit allowed is the lesser of the foreign taxes paid or the U.S. tax on foreign-source income, multiplied by the ratio of foreign-source income to total income. The U.S. tax on the foreign-source income is ($300,000 ÷ $1,200,000) × ($408,000) = $102,000. Since the foreign taxes paid ($75,000) are less than the U.S. tax on foreign-source income ($102,000), the foreign tax credit allowed is the full amount of foreign taxes paid, which is $75,000.

During the Year, Purple Corporation (A U