The U.S. IRS has published a practice unit, Overview – Expense Allocation/Apportionment in Calculation of the IRC 904 FTC Limitation. The general overview of the practice unit includes the following:
The United States taxes a U.S. corporation's income on a worldwide basis. To prevent double taxation, U.S. taxpayers are allowed a credit for foreign income taxes paid/accrued. However, the amount of Foreign Tax Credit (FTC) a taxpayer can utilize each year is based upon the ratio of foreign so…