8 Kim, a U.S. citizen and resident, owns and operates a novelty goods business. During 2014, Kim has taxable income of $100,000, made up of the following: $50,000 from foreign sources and $50,000 from U.S. sources. In calculating taxable income, the standard deduction is used. The income from foreign sources is subject to foreign income taxes of $26,000. For 2014, Kim files a joint return claiming his three children as dependents.

Answer

1. Tax liability for 2015 tax return (hint: use the tax rate schedule)

2. Foreign tax imposed by foreign government (i.e., foreign tax paid to the foreign government)

3. Foreign tax credit (FTC) that Kim can claim for 2015 tax return

4. Tax due (i.e., tax to be paid to the IRS) for 2015 tax return

5. Unused foreign tax credit that Kim can carry over

6. Now, assume Kim rather chooses the option to exclude foreign earned income. Determine Kims tax due.