Individuals similar scenarios where both qualify for a foreign

          Individuals or corporations would
always want to minimize their tax liability. There are different rules that can
totally be the offset against tax liability.  A foreign tax credit (FTC) is eligible
for anyone who has either investment income or worked in a foreign country. Any
individual or business entity claim a tax credit for any foreign income tax
paid in another country other than the U.S. Section 27(a). The sole purpose of foreign tax credit (FTC) is to
avoid double taxation. If the tax has already been paid on income earned in a
different country, there should not be a need to pay the taxed again in the
U.S. For individuals, foreign taxable income is determined before personal and
dependency exemption is deducted. Mr. Malik and Mr. Harrick have similar
scenarios where both qualify for a foreign tax credit. The case of Estate of Herrick vs. U.S. illustrates how Internal
Revenue Service (IRS) can grant a refund based on foreign tax credit. Mr. Malik
could use Mr. Harrick’s example to use as a guideline to claim a refund by taking
foreign tax credit on tax returns.

          Mr. Malik is an U.S citizen who owns a
small chain of a popular café called Chai Palace in his hometown in India. Throughout
years 2011 to 2013 he had been reporting his foreign taxable income to Internal
Revenue Service on the proper filing date. However, Mr. Malik did not have the
proper knowledge of the foreign tax credit and paid his taxes on income both in
India and in the U.S. He had filed and paid all of his income taxes in India
during the journey of his three year old business. Mr. Malik mistakenly thought
since he paid high taxes in India and lower taxes in the U.S., he would have to
pay income taxes on both countries and therefore, did not provide the Internal
Revenue Service with his tax returns from India. Now that Mr. Malik has proper knowledge
of double taxation, and foreign tax credit, he wants a refund for those three
years he was subjected to double taxation.

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          In a similar case of Estate
of Herrick vs. U.S., the plaintiff wanted a tax refund from the Internal Revenue
Service for the years 2000 through 2006. Plaintiff is a U.S. citizen, the
Estate of Austin D. Herrick who lived and worked in the Philippines during the
time period claimed for a refund. Plaintiff argues that Herrick believed he does
not owe United States taxes on the income he earned in the Philippines because he
already paid income taxes on that income. Herrick did not file United States
tax returns from years 2000 through 2006. However, for those years IRS prepared
substitute tax returns for Herrick which did not include the foreign taxes
Herrick paid. Therefore, the IRS charged Herrick $1,330,162.66 in Unites States
taxes. The IRS took that amount from Herrick’s United States investment
accounts to pay the amounts due from the IRS prepared substitute tax returns. On
the other hand, after the death of Herrick in 2011, his daughter, the administrator
of his estate, prepared U.S. income tax returns and filed for the tax years
2000 through 2006. Those tax returns properly stated Herrick’s foreign taxes
paid and applied the foreign earned income exclusion. Based on these returns,
Plaintiff argued for a refund from IRS. Being the defendant, the U.S did argue
that the plaintiff needed additional document to qualify for a refund. However,
Herrick’s daughter provided records of taxes paid in the Philippines and therefore,
was entitled to a refund for Herrick’s 2000 through 2006 tax returns. Plaintiff’s
motion for summary judgement was granted and was refunded the amount of
$1,197,979.15. (Estate of Herrick
vs. U.S, 2016)