[Anonymous]

Hi, I was wondering if anyone could help me out w/ a question I came across that confused me. I am using Becker and came across a question in R3 regarding C corporations. Here’s the question and answer-

Foreign income taxes paid by a corporation:

a. May be claimed either as a deduction or as a credit, at the option of the corporation.

b. May be claimed only as a deduction.

c. May be claimed only as a credit.

d. Do not qualify as either a deduction or a credit.

The correct answer was letter (a) but I thought the right answer was letter (c). The R3 chapter in Becker does not mention being able to take foreign taxes as a deduction anywhere. The section talking about the deductibility of taxes is pretty brief. All it says is that “all state and local taxes and federal payroll taxes are deductible when incurred… Federal income taxes are not deductible. Foreign income taxes may be used as a credit.”

Could someone help me out with this question and verify that letter (a) is in fact correct? Any help would be greatly appreciated. Thanks so much.

[Lisa]

@CE1435:

Yes, letter A is correct.I believe I saw that in the WILEY REG Book, ( if not is was Gleim Book)

AUD 8/04/11: 78
BEC 1/9/12: 73, 4/04/12: 80
FAR 10/25/12: 80
REG 02/25/13: 79
Ethics 100%
VA License Issued 3/2013

[Justinnnn]

A is correct.

Form 1118 instructions

Credit or Deduction

A corporation may choose to take either a

credit or a deduction for eligible foreign

taxes paid or accrued. The choice is made

annually. Generally, if a corporation elects

the benefits of the foreign tax credit for any

tax year, no portion of the foreign taxes

will be allowed as a deduction in that year

or any subsequent tax year.

REG 80 2/7/11
FAR 91 10/8/11
AUD 97 11/22/11
BEC 96 2/4/12

CPA 3/15/13

[Author]

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