Prentice Hall s Federal Taxation 2015 Corporations Partnerships Estates and Trus
ID: 2473741 • Letter: P
Question
Prentice Hall s Federal Taxation 2015 Corporations Partnerships Estates and Trusts 28th Edition: C: 16-37
Arnie, a U.S. citizen who uses rhw calendar year as his tax year and the cash method of accounting, operates a sole proprietorship in Country Z. In Year 1, he reports 500,000 dubles of pretax profits. On June 1 of Year 2, he pays Country Z income taxes of 150,000 dubles for calendar Year 1. Duble-U.S. dollar exchanges rates on various dates in Year 1 and Year 2 are as follows:
December 31, Year 1 4.00 dubles = $1 (U.S.)
Year 1 average 3.75 dubles = $1 (U.S.)
June 1, Year 2 4.25 dubles = $$1 (U.S.)
a. What is the U.S. dollar amount of Arnie's foreign tax credit?
Explanation / Answer
Arnie;s foreign tax credit is = 150000/4.25=$ 35,294.12