USCo,a domestic corporation,receives $100,000 of foreign-source income in the general limitation income category and $40,000 of foreign-source income in the passive income category.Worldwide taxable income is $1,200,000 and the U.S.tax liability before FTC is $420,000.Foreign taxes attributable to the general limitation income are $60,000 and to the passive income are $4,000.What is USCo's foreign tax credit for the tax year?

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The foreign tax credit is limited to the U.S. tax liability multiplied by a fraction, the numerator of which is the foreign-source taxable income in the relevant category and the denominator of which is the worldwide taxable income. For the general limitation income, the foreign tax credit is $420,000 x ($100,000/$1,200,000) = $35,000. For the passive income, the foreign tax credit is $420,000 x ($40,000/$1,200,000) = $14,000. The total foreign tax credit is $35,000 + $14,000 = $49,000. However, the foreign tax credit cannot exceed the foreign taxes paid or accrued. In this case, the foreign taxes paid or accrued are $60,000 + $4,000 = $64,000. Therefore, the foreign tax credit is limited to $64,000.

USCo,a Domestic Corporation,receives $100,000 of Foreign-Source Income in the General