Page 29 - International Taxation IRS Training Guides

FTC
Basket Limitation Equation

 §904(d)
limits the FTC to the pre-credit U.S. tax on a

foreign-source taxable income
specific type of
(“FSTI”):

in 904(d) Basket

FSTI x Pre-credit U.S. Tax
World-wide taxable income

U.S. tax rate
 Or: FSTI in each basket x

 Because FSTI
is on a net basis, expense allocation

(domestic
vs. foreign and basket-by-basket) is key

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