Brendan paid $950 to Brazil in foreign income taxes.His total income was $52,500,which included $12,000 of investment income from Brazil.His U.S.tax liability is $8,000.Brendan's foreign tax credit is:

Question

Quizplus · Accepted Answer

Brendan's foreign tax credit is limited to the lesser of the foreign taxes paid ($950) or the proportion of his U.S. tax liability that corresponds to his foreign income. Since $950 is less than the calculated proportion of his U.S. tax liability, his foreign tax credit is $950.

Brendan Paid $950 to Brazil in Foreign Income Taxes