All Theses, Dissertations, and Capstone Projects

Year of Award



Master of Science in Taxation (MST)


College of Business & Professional Studies

Degree Program



Business Administration


income, corporation, domestic, dividend, international


The topic I have chosen for my Capstone Research Project is the Direct and Indirect Foreign Tax Credit and the limitations imposed on this credit. The reason I am proposing to write on this topic is that it involves considering the tax laws of both the exporting and importing countries of the world. The foreign tax credit embodies the basic mechanism whereby the United States income tax system is accommodated to the income tax systems of other nations.

The United States taxes the worldwide income of its citizens, residents, and domestic corporations. The application to an item of income of both an income tax at source imposed by the country of source and an income tax at home imposed by the country of residence results in international double taxation. The United States has chosen the foreign tax credit device as the principal method to be used in its international tax relations.

The international tax department of a large multinational corporation spends a significant portion of its effort computing the foreign tax credit. The calculation of this foreign tax credit is an extremely cumbersome and complex project. Without the use of computer programs, this task would be impossible. However, the individuals responsible for reviewing the output need to be well versed in these rules.

This paper discusses numerous foreign tax credit provisions including the following:

1. Section 901 which contains the basic provision permitting the credit.

2. Section 902 which contains the basic provision applicable to the "deemed paid" or indirect credit for taxes paid or accrued by foreign subsidiaries or affiliates of domestic corporations.

3. Section 903 which provides the taxes which are creditable.

4. Section 904 which provides the various limitations imposed on the credit that can be taken against the U.S. tax.

Document Type

Restricted Thesis


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