Foreign Withholding Tax and the 15 Percent Rate on Dividends

Lauricella, Leonard J.
September 2004
International Tax Journal;Fall2004, Vol. 30 Issue 4, p82
Academic Journal
The article discusses the impact of the reduced tax rate on dividend income on an individual taxpayer's ability to claim a credit for foreign withholding taxes imposed on the dividend income. Section 904(b)(2)(B) of the Internal Revenue Code limits the amount of U.S. tax that can be offset by foreign tax credit when the taxpayer has capital gains subject to a favorable rate of U.S. tax. It further limits the foreign tax credit by reducing the amounts of foreign source taxable income in the numerator of the foreign tax credit limitation fraction, and the amount of world wide taxable income in the denominator.


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