Adrienne has total taxable income of $93,000 which includes $10,000 taxable income from India.She paid $2,800 in foreign income taxes,and her U.S.tax liability is $25,210.Adrienne's foreign tax credit is:

Question

Quizplus · Accepted Answer

To calculate the foreign tax credit, we need to find the lesser of the foreign income tax paid or the ratio of foreign taxable income to total taxable income multiplied by the U.S. tax liability. The calculation is as follows:

Foreign tax credit = lesser of (foreign income tax paid, foreign taxable income/total taxable income x U.S. tax liability)
Foreign taxable income/total taxable income = $10,000/$93,000 = 0.1075
Foreign tax credit = lesser of ($2,800, 0.1075 x $25,210) = lesser of ($2,800, $2,711) = $2,711. Therefore, the answer is D.

Adrienne Has Total Taxable Income of $93,000 Which Includes $10,000