Which Tax Rule Applies to an Excess Foreign Tax Credit

question 24

Multiple Choice

Which tax rule applies to an excess foreign tax credit (FTC) that arises in 2019?

• A) The excess FTC is first carried back to 2018 and any excess is carried forward for 10 years.
• B) The excess FTC is first carried back to 2017, then 2018, and any excess is carried forward for 20 years.
• C) The excess FTC is first carried back to 2016, then 2017, then 2018, and any excess is carried forward for five years.
• D) The excess FTC is carried forward 10 years, with no carryback allowed.

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Definitions:

Shortage Costs

Costs incurred when demand exceeds supply, leading to inventory shortages, potentially including lost sales, backorder costs, and customer dissatisfaction.

Stock Out Costs

The costs associated with running out of stock, including lost sales, diminished customer loyalty, and operational disruption.

Accounts Payable Period

The Accounts Payable Period is the average amount of time it takes for a business to pay off its suppliers after receiving goods or services.

Operating Cycle

The average period of time required for a business to convert its investments in inventory back into cash through the process of producing goods, selling them, and collecting revenue from customers.