Collins,Inc.received gross foreign-source dividend income of $250,000.Foreign taxes withheld on the dividend were $25,000 and no § 902 credit is available.Its worldwide taxable income for the tax year is $500,000.Its U.S.tax before FTC is $175,000.Collins' current year FTC is $87,500.

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The foreign tax credit (FTC) is limited to the lesser of the foreign taxes paid or the U.S. tax attributable to foreign-source income. The U.S. tax attributable to the foreign-source income is calculated as ($250,000 / $500,000) * $175,000 = $87,500. However, since the foreign taxes withheld are $25,000, the FTC is limited to $25,000, not $87,500.