The Foreign Tax Credit Is Equal to the Smaller of Foreign

question 57

True/False

The foreign tax credit is equal to the smaller of foreign taxes paid or accrued in the tax year or the portion of the U.S.income tax liability attributable to the income earned in all foreign countries.

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Definitions:

Contingent Liability

A potential obligation that may arise depending on the outcome of a future event, not recognized on the balance sheet unless occurrence is probable and the amount can be reasonably estimated.

Estimated Liability

A potential financial obligation that may arise in the future, recognized in accounting based on probable expenditures.

Times Interest Earned

A financial ratio that measures a company's ability to meet its debt obligations by comparing its income before interest and taxes (EBIT) to its interest expenses.

Interest Expense

Interest expense is the cost incurred by an entity for borrowed funds, usually expressed in the form of interest payments on loans, bonds, or credit lines.