Question

Enders, Inc. a domestic corporation that invests in foreign securities, reports total taxable income for the tax year of $290,000, consisting of $208,800 in U.S.-source business profits and $81,200 of income from foreign sources. Foreign taxes of $24,000 were withheld by foreign tax authorities. Enders' U.S. tax before the FTC is $60,900.

Required:
a. Compute Enders's FTC for the tax year.

Answer 1

$17,052

Step-by-step explanation:

Foreign tax credit could not be more than from U.S Tax Liability as prescribed fraction.

The fraction will be as follow

Fraction for FTC = Taxable Income / Total US and Foreign income

As per given data

Total taxable Income = $290,000

Taxable foreign income = $81,200

US Tax before FTC = $60,900

Enders's FTC = 60,900 x 81,200 / 290,000 = $17,052