Which of the following circumstances would favor the foreign earned income exclu

Question

Which of the following circumstances would favor the foreign earned income exclusion over the foreign tax credit? Income is subject to a high tax rate in a foreign country; income is too high to qualify for either the full exclusion or the full credit;30%of foreign income is considered earned, the other 70%is investment income; Income is subject to a low tax rate in the foreign country Which of the following circumstances would favor the foreign earned income exclusion over the foreign tax credit? Income is subject to a high tax rate in a foreign country; income is too high to qualify for either the full exclusion or the full credit;30%of foreign income is considered earned, the other 70%is investment income; Income is subject to a low tax rate in the foreign country Which of the following circumstances would favor the foreign earned income exclusion over the foreign tax credit? Income is subject to a high tax rate in a foreign country; income is too high to qualify for either the full exclusion or the full credit;30%of foreign income is considered earned, the other 70%is investment income; Income is subject to a low tax rate in the foreign country

Explanation / Answer

Ans

Correct: Income is subject to a low tax rate in the foreign country

Other options are not correct as 1. high income tax in foreign country will sure induce the taxpayer to opt for tax credit. 2. investment income is passive income and it is always taxed in US with the corresponding tax credit benefit.

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