Hello. I am working on problem 16-39 in the book of Printice Hall\'s Federal Tax
ID: 2456985 • Letter: H
Question
Hello. I am working on problem 16-39 in the book of Printice Hall's Federal Taxation 2015 Corporations, Partnerships, Estates, and Trusts. It askes for the excess credit, howeber when I calculated the Credit limitation it was all higher that the foreign tax accrual. Wouldn't that meant hat there is no excess credit just excess limitation? Also, part d asks what measures should Tucson consider if it expects its current excess foreign tax credit position to persist in the long-run? I am not sure how to answer this? Here is the problem that is given to me:
Tucson, a U.S. corporation organized in Year 1, reports the following items for a three-year period.
Year 1 Year 2 Year 3
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 problem asks to find the credit limitation and the excess credit. and Then find the same thing but if 100,000 dollars were allocated to the foreign source income.
Explanation / Answer
Credit limit for Year 1:
Credit limit = taxable income from sources outside the United States/total taxable income from U.S. and foreign sources
Credit limit = 1,000,000/400,000
Credit limit = 2.5
Credit limit for Year 2:
Credit limit = taxable income from sources outside the United States/total taxable income from U.S. and foreign sources
Credit limit = 1,000,000/300,000
Credit limit = 3.34
Credit limit for Year 3:
Credit limit = taxable income from sources outside the United States/total taxable income from U.S. and foreign sources
Credit limit = 1,000,000/500,000
Credit limit = 2
Credit limit but if 100,000 dollars were allocated to the foreign source income:
Credit limit for Year 1:
Credit limit = taxable income from sources outside the United States/total taxable income from U.S. and foreign sources
Credit limit = 1,000,000/500,000
Credit limit = 2
Credit limit for Year 2:
Credit limit = taxable income from sources outside the United States/total taxable income from U.S. and foreign sources
Credit limit = 1,000,000/400,000
Credit limit = 2.5
Credit limit for Year 3:
Credit limit = taxable income from sources outside the United States/total taxable income from U.S. and foreign sources
Credit limit = 1,000,000/600,000
Credit limit = 1.67
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.