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Sec. 1.904-1 Limitation on credit for foreign income taxes.

(a) In general. For each separate category described in § 1.904-5(a)(4)(v), the total credit for foreign income taxes (as defined in §1.901-2(a)) paid or accrued (including those deemed to have been paid or accrued other than by reason of section 904(c)) to any foreign country (asdefined in §1.901-2(g)) does not exceed that proportion of the tax against which such credit is taken which the taxpayer's taxable income from foreign sources (but not in excess of the taxpayer's entire taxable income) in such separate category bears to the taxpayer's entire taxable income for the same taxable year.

(b) Special computation of taxable income. For purposes of computing the limitation under paragraph (a) of this section, the taxable income in the case of an individual, estate, or trust is computed without any deduction for personal exemptions under section 151 or 642(b).

(c) Joint return. In the case of spouses making a joint return, the applicable limitation prescribed by section 904(a) on the credit for taxes paid or accrued to foreign countries and possessions of the United States is applied with respect to the aggregate taxable income in each separate category from sources without the United States, and the aggregate taxable income from all sources, of the spouses.

(d) Consolidated group. For rules relating to the computation of the foreign tax credit limitation for a consolidated group, see §1.1502-4.

(e) Applicability dates. This section applies to taxable years that both begin after December 31, 2017, and end on or after December 4, 2018.

[Adopted by T.D. 6275, 22 FR 9657, Dec. 3, 1957; republished by T.D. 6500, 25 FR 11910, Nov. 26, 1960. Revised by T.D. 6789, 29 FR 19243, Dec. 31, 1964, as amended by T.D. 7294, 38 FR 33080, Nov. 30, 1973; T.D. 7292, 38 FR 33292-33300, Dec. 3, 1973; T.D. 7490, 42 FR 30497, June 15, 1977; corrected at 42 FR 32536, June 27, 1977. Revised by T.D. 9882, 84 FR 69022-69123, Dec. 17, 2019; amended by T.D. 9922, FR 71998-72075, Nov. 12, 2020.]

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