Which of the Following Statements About the Foreign Tax Credit

question 13

Multiple Choice

Which of the following statements about the foreign tax credit limitation is false?

• A) The foreign tax credit cannot exceed the U.S. tax on foreign source income.
• B) Foreign tax credits in excess of the limit can be carried forward indefinitely.
• C) Cross-crediting of taxes paid in high-tax and low-tax foreign jurisdictions can increase allowable foreign tax credits.
• D) The foreign tax credit limitation is based on the ratio of foreign source income to total taxable income.

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Definitions:

Bond Issuer

An entity, such as a corporation or government, that raises funds by issuing bonds, obligating itself to pay interest to bondholders and repay the principal at maturity.

Obligations

Legal or financial duties or commitments that an entity is required to fulfill.

Collateral Agreements

Contracts that pledge an asset as security for the repayment of a loan, providing a lender a form of protection against the borrower's default.

Unsecured Debt

Debt that is not backed by any collateral, meaning if the borrower defaults, the lender has no secured asset to claim for repayment.