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C:16-41 Foreign Tax Credit Limitation. Tucson, a U...




C:16-41 Foreign Tax Credit Limitation. Tucson, a U.S. corporation organized in Year 1, reports the following items for a three-year period. Foreign tax accrual $ 100,000 $ 120,000 $ 180,000 Foreign source taxable income 400,000 300,000 500,000 Worldwide taxable income 1,000,000 1,000,000 1,000,000 The foreign source and worldwide taxable income items are determined under U.S. law. a. What is Tucson?s foreign tax credit limitation for each of the three years (assume a 34% U.S. corporate tax rate and that income from all foreign activities fall into a single basket)? b. How are Tucson?s excess foreign tax credits (if any) treated? Do any carryovers remain after Year 3? c. How would your answers to Parts a and b change if the IRS determines that $100,000 of expenses allocable to U.S.-source income should have been allocable to foreignsource income? d. What measures should Tucson consider if it expects its current excess foreign tax credit position to persist in the long-run?


Paper#5907 | Written in 18-Jul-2015

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