Question

Benny Franklin receives a Form 1099-DIV from his investment manager that lists foreign taxes paid of $432 and Benny’s foreign investment earnings of $1,500. Benny had no other investment earnings and his total taxable income for the year is $58,000. Benny’s tax liability before any foreign taxes is $8,700.

Calculate the amount of the foreign tax credit.

$

Answer 1

Exemption from the Foreign Tax Credit Limit.

All of your gross foreign income and the foreign taxes are reported to you on a payee statement (such as a Form 1099-DIV or 1099-INT).

As per the given info in the question Mr.Benny Franklin receives the Form 1099-DIV he can claim the total foreign tax paid during the year. The total tax paid during the year is $432.

The total foreign tax credit is that the $432. from the total tax liability.

We have given the relief to the investor to avoid the double taxation.