# 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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## Moulard (Feb 3, 2017)

Without referring to the quiz, based on info in your post, the Answer would be E: $5,833

See Pub 514 - Foreign Taxes for Which You Cannot Take a Credit 

You must prorate the tax credit available using the following formula...

Foreign Earned Income Tax Paid x (Non-Excluded Foreign Earned Income / Foreign Earned Income)

so for the example...

35,000 x (20,000 / 120,000) = 5,833


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