Page 28 - International Taxation IRS Training Guides

Foreign Tax Credit (FTC)

goals:
Section 904 limits effectuate FTC

tax on foreign-source
 Section 904 limits FTCs to U.S.
No credit for foreign tax paid on U.S. source
income.

income.

U.S. has primary right to tax U.S. source income.
• Goal:

 Section 904(d) further
limits FTCs by certain categories

(“baskets”) of income.

Prevent crediting excess foreign taxes paid on high-tax
• Goal:
one type (e.g. high-taxed manufacturing income)
income of
against
U.S. tax on lower-taxed income of another type (e.g.,
low-taxed interest
income).

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