Sarah, a married taxpayer who files a joint return, is considering a foreign assignment for two years.
Question:
Sarah, a married taxpayer who files a joint return, is considering a foreign assignment for two years. In 2019, she will earn $120,000 in the foreign country. Sarah has no other income. She will be eligible for either the foreign tax credit or the foreign-earned income exclusion. The average tax rate on Sarah's earnings if fully taxable under U.S. law would be 24%. The average tax rate for the foreign salary is 20% under the foreign country's laws.
a. Discuss in general terms the computation of the foreign tax credit and Its limitation.
b. Would Sarah be better off electing the foreign tax credit or the foreign earned income exclusion? Explain.
Step by Step Answer:
a The foreign tax credit equals the income tax paid or accrued to a foreign country but it is limite...View the full answer
Federal Taxation 2020 Comprehensive
ISBN: 9780135196274
33rd Edition
Authors: Timothy J. Rupert, Kenneth E. Anderson, David S. Hulse
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