Question

ABC, Inc., has $120,000 U.S.-source income, $80,000 of foreign source income, and $25,000 foreign taxes deemed paid. Assume that the U.S. income tax liability before the foreign tax credit is $61,250. ABC's foreign tax credit is

Answer 1

Answer:

ABC's foreign tax credit = $24,500

Explanation:

Given:

Source income = $120,000

Foreign source income = $80,000

Foreign taxes deemed = $25,000

Foreign tax credit = $61,250

Find:

ABC's foreign tax credit

Computation:

ABC's foreign tax credit = [$80,000/($120,000 + $80,000)] x $61,250

ABC's foreign tax credit = $24,500