Taxation of Foreign Income

Question 1

How is the foreign tax credit limitation calculated?

Answer 1

U.S. tax on worldwide income x Foreign source taxable income / Worldwide taxable income.

Question 2

Which has priority - U.S. tax law or treaties?

Answer 2

Treaties between the U.S. and other countries generally override the tax provisions in the U.S. tax law or foreign tax law.

Question 3

What constitutes foreign-sourced earned income?

Answer 3

Earned income is foreign source if earned in a foreign country and U.S. source if earned domestically.

Question 4

What sources of U.S. interest income are taxable?

Answer 4

U.S. government
No corporate U.S. residents
Domestic corporations.