Losses in a year limit a taxpayer’s worldwide income. If a U.S. taxpayer has income from foreign sources but a loss from U.S. sources, the U.S. loss is simply allocated to the taxpayer’s foreign income. Conversely, foreign losses have the effect of reducing the overall amount of taxable income and when combined with the foreign tax credit taxpayers reap a double benefit. To illustrate, if a domestic taxpayer sustains an overall loss from foreign activities during the year, that loss offsets the taxpayer’s domestic income in the loss year. If the taxpayer in subsequent years earns an overseas profit that is not offset by earlier loss there is an excess loss available to offset U.S. source income. To prevent this result the Code requires the foreign loss to be recaptured, meaning the foreign source income earned in the subsequent year is treated as domestic source income for purposes of the foreign tax credit. Specifically, only 50 percent of a taxpayer’s foreign earnings are resourced under the Code whereas taxes on the other 50 percent of the foreign earnings are still creditable. The sum of this scheme, like the limitations on the foreign tax credit, ensures that the United States is not conceding its authority to collect taxes on U.S. source income.