The Canadian Government withholds $2500 of tax from a payment made to Emilia made in 2020....

The Canadian Government withholds $2500 of tax from a payment made to Emilia made in 2020. Under the tax treaty between the United States and Canada, Emelia owes only $1,500 and can claim a refund for the other $1,000. What amount is eligible for the Foreign Tax Credit (regardless of whether or not Emelia applies for the credit) on her United States income tax return?

A. $0
B. $500
C. $1,000
D. $1,500

Solutions

Expert Solution

C. $1000

As per the tax treaty between USA and Canada, the taxpayer is allowed to claim tax credit for any additional tax witheld by a country where the tax payer does not have residence.

In this case since Canada has witheld $2500 tax wherein Emelia's tax liability s USA is meagre $1500, she is allowed to avai tax credit of $1000.

ekkarill92 answered 2 years ago

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