# Quiz question. Form 1116 - Foreign tax credit



## Albertine (Sep 26, 2016)

This is a quiz question from Taxes for Expats. With the limited information given in the question, I don't see how the answer (or any of the alternatives) are correct. How is all the foreign tax paid allocated to the excluded foreign income? If I were to fill out a 1116 form right now, the way I thought it was supposed to be filled out, I wouldn't end up getting 0 as my answer.


"Andrew lives in Sweden and makes $120,000 a year. He paid $35,000 income tax on his salary in Sweden. Andrew excluded $100,000 of foreign earned income and housing expenses. How much of foreign tax credit can he apply towards the remaining earned income?

a) $35,000
b) $17,500
c) $0
d) The amount of the U.S. tax due on the remaining $100,000

Answer: C	$0 - All amount of foreign tax paid was allocated to the excluded foreign income. No tax remained available for the credit"


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## Bevdeforges (Nov 16, 2007)

I'd have to take a look at the instructions for the 1116 form, but what I suspect is the case here is that once you've excluded $100,000 of salary income, there is only $20,000 left of AGI (adjusted gross income). Once that is subject to the personal exemption, and then the standard deduction, there isn't all that much left to tax. 

Though I'd be inclined to say d) - as long as you've mis-typed that response. It should be "The amount of the US tax due on the remaining $20,000" - i.e. Andrew's salary less the $100,000 excluded.
Cheers,
Bev


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## Albertine (Sep 26, 2016)

I copy-pasted it, so no typo. I tried getting a response from Taxes for Expats.. but they want $ for such assistance. The correct answer according to the answer sheet is C. 

$0 would make sense if he was married and the $120,000 earned income was combined and they filed jointly. If he's single (which the question implies) I end up calculating a small federal tax and an equal small FTC. 

I'll be filing form 1116 next year and thought I had it figured out to some degree.. All of this made me unsure. For now I think I'm chalking it up to a mistake made in the quiz by Taxes for Expats.


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## Bevdeforges (Nov 16, 2007)

Have never heard of the outfit you mention, so can't comment on their tendency for errors (or possibly their attempt to rope in new paying recruits <g>).
Cheers,
Bev


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