Question

Jenna paid foreign income tax of $1,326 on foreign income of $8,112. Her worldwide taxable income was $91,400, and her U.S. tax liability was $23,000. What is the amount of foreign tax credit (FTC) allowed? What would be the allowed FTC if Jenna had paid foreign income tax of $2,400 instead? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.)

Answer 1

Step-by-step explanation:

The measure of remote duty credit is constrained to the lesser of outside expense paid or [(Foreign - source taxable income / worldwide taxable income) x U.S tax liability]

For this situation, the impediment computation is ($8,112/$91,400) x $23,000 = $2,041. Along these lines, the measure of outside expense credit is equivalent to the $1,326 remote duty paid, since it is less.

In the event that the measure of remote personal expense paid had changed to $ hence, the permitted outside duty credit would be restricted to $2,041