Problem 7-21 (Algorithmic) Foreign Tax Credit (LO 7.6)

Martha and Lew are married taxpayers with $3,150 of foreign tax withholding from dividends in a mutual fund. They have enough foreign income from the mutual fund to claim the full $3,150 as a foreign tax credit. Their tax bracket is 35 percent and they itemize deductions.

Should they claim the foreign tax credit or a deduction for foreign taxes on their Schedule A?

If required, round your answer to the nearest dollar.

1. The foreign tax deduction will result in a -

2. tax benefit where as claiming the foreign tax credit yields a - tax benefit.

3. Therefore, the taxpayers should - claim the foreign tax credit or deduct the foreign taxes?