David,an Employee of Lima Corporation,is a U

question 159

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 $101,300 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:

Link-Chain Method

A statistical method used for adjusting economic or financial time series data for the effects of inflation or other external factors to show real changes over time.

Dollar-Value LIFO

Dollar-value LIFO (Last In, First Out) is an accounting method used for inventory that measures the cost of inventory in dollar terms, adjusting for inflation.

Cost Index

An index that measures the changes in the cost or price of specific goods or services over time.

FIFO Cost

FIFO, or First-In, First-Out, is an inventory valuation method where the costs of the earliest goods purchased or produced are the first to be recognized in determining cost of goods sold.