Question

For foreign investments, dividends are reported in _____ dollars, and withholding tax appears as ______ on the US tax return.

A) Foreign; an adjustment.
B) US; an expense.
C) US; a credit.
D) US; a liability.

Answer 1

Dividends from foreign investments are reported in US dollars and the withholding tax is treated as a credit on the US tax return.

Step-by-step explanation:

For foreign investments, dividends are reported in US dollars, and withholding tax appears as a credit on the US tax return. This means the correct answer is option C) US; a credit. US taxpayers may be eligible to claim a foreign tax credit for withholding taxes paid to another country. This aims to reduce the double taxation of income earned abroad. Additionally, financial flows related to income payments in economic transactions are important, as they represent money going out of the United States to foreign investors for their investments in U.S. assets, like stocks.