David,an Employee of Lima Corporation,is a U

question 87

Multiple Choice

David,an employee of Lima Corporation,is a U.S.citizen and the regional sales manager for South America.His office is in Miami and he spends nine months each year on business in South America.Which of the following statements about the treatment of his income from Lima Corporation is correct?

• A)He must include his Lima income in his gross income and is not allowed a tax credit for any South American taxes paid.
• B)He has the option of either excluding $102,100 of his Lima income or taking a tax credit for the South American taxes paid.
• C)Because he is in South America only nine months of the year,he is only allowed to exclude $75,975 of Lima income.
• D)Because he is in South America only nine months of the year,he is not allowed to exclude any of his Lima income,but he can take a tax credit for any South American taxes paid.

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Definitions:

Exchange Rate

The value of one currency for the purpose of conversion to another. It determines how much of one currency can be exchanged for another currency.

Reciprocal

Pertaining to a mutual exchange or relationship where two parties give and take symmetrically.

Functional Currency

The currency of the primary economic environment in which an entity operates and generates cash flows.

Currency

A medium of exchange for goods and services, typically issued by a government.