Question

Without the foreign tax credit, double taxation would result when: Group of answer choices The United States and a foreign country both tax the foreign-source income of a U.S. resident. A foreign country taxes the foreign-source income of a nonresident alien. The United States taxes the U.S.-source income of a U.S. resident. Terms of a tax treaty assign income taxing rights to the U.S.

Answer 1

Answer:

Without the foreign tax credit, double taxation would result when the United States and a foreign country both tax the foreign-source income of a U.S. resident.

Explanation:

Double taxation describes the situation in which a tax object is subject to the same tax subject for the same tax period (double taxation at national level) or more than one tax regime (double taxation at international level). In most cases, double taxation results from the fact that tax regimes within the framework of the sovereignty principle simultaneously use the principle of universality and the principle of location, therefore having the right to tax the same person or activity. Double taxation means a significant restriction on the general freedom of movement - in particular the free movement of capital and freedom of establishment - and should ideally be avoided.