The foreign tax credit regime is the primary mechanism used by the United States government to mitigate or eliminate the potential double taxation of income earned by U.S. persons outside the United States.
The U.S. government also mitigates the potential for double taxation through exemptions of income earned outside the United States from U.S. taxation.

Question

Quizplus · Accepted Answer

This statement accurately describes the foreign tax credit regime as the primary mechanism to avoid double taxation on income earned by U.S. persons outside the United States. However, the second part of the statement regarding exemptions of income earned outside the U.S. from U.S. taxation is not completely true. While certain types of income may be exempt or excluded from U.S. taxation (such as foreign earned income up to a certain amount), not all foreign-earned income is exempt. The foreign tax credit is usually the more common and effective mechanism for avoiding double taxation.

The Foreign Tax Credit Regime Is the Primary Mechanism Used