The corp has domestic taxable income of $400,000 and foreign-source taxable income of $200,000. Their U.S. tax on worldwide income is $204,000. The corp paid foreign income taxes of $65,000. What is their foreign tax credit on their US income tax return?

To calculate the foreign tax credit on the US income tax return, we need to follow a specific formula. The general steps to determine the foreign tax credit are as follows:

1. Calculate the overall foreign tax credit limit: This is the maximum amount of foreign taxes that can be used as a credit on the US income tax return. It is calculated by multiplying the US tax on worldwide income (before any foreign tax credit) by the ratio of foreign-source taxable income to worldwide taxable income.

Overall foreign tax credit limit = [(Foreign-source taxable income / Worldwide taxable income) × US tax on worldwide income]

In this case, the foreign-source taxable income is $200,000, the worldwide taxable income is $600,000 ($400,000 + $200,000), and the US tax on worldwide income is $204,000. So,

Overall foreign tax credit limit = [(200,000 / 600,000) × 204,000]

2. Calculate the eligible foreign taxes: This is the amount of foreign taxes that are eligible for the foreign tax credit. It is the lesser of the foreign taxes paid or the overall foreign tax credit limit.

In this case, the foreign taxes paid are $65,000, and the overall foreign tax credit limit is calculated in step 1.

Eligible foreign taxes = Min(foreign taxes paid, overall foreign tax credit limit)

3. The eligible foreign taxes calculated in step 2 are the foreign tax credit that can be claimed on the US income tax return.

So, in this case, the foreign tax credit on the US income tax return is $65,000 (as it is the lesser of the foreign taxes paid and the overall foreign tax credit limit).