A corporation has $100,000 of U.S.source taxable income and $300,000 of foreign source taxable income from countries X and Y for a total worldwide taxable income of $400,000.Countries X and Y levy a total of $60,000 in foreign taxes upon the foreign source taxable income.U.S.taxes before credits are $140,000.The foreign tax credit limitation is
A)$35,000.
B)$60,000.
C)$80,000.
D)$105,000.

Question

Quizplus · Accepted Answer

B)Foreign tax credit equals the lesser of foreign taxes paid or accrued ($60,000)or the portion of the U.S.income tax liability attributable to income earned in all foreign countries ($300,000/$400,000 × $140,000 = $105,000).

A Corporation Has $100,000 of U