Where should I put the forbidden palace?

Put FP at the center of your largest landmass. Jump your palace to a faraway island, with no other city around.
 
At least 2-3 cities away from your Capital.Choose a city which is in a good position and isn't isolated.FB will act more or less as your second Capital in the cities surounding it.So see which are the cities that in the future will grow quikly and their production level will rise,and there build FB.
 
recently i wrote this about it:

also like to explain my placement of the FP, as i see there have been some discussions about this lately.
For the higher OCN, it doesnt matter where you place the FP, so the only thing to look at is the effect on distance corruption.
If you place it too close to the capital, the reduction in distance corruption is partly (or completely if you place it in the capital) wasted. If you place it too far away from the capital, it will be wasted because the cities that benefit from it are so badly corrupt by rank corruption that they are beyong any help.
So the FP needs to be placed there where most cities benefit from the lower distance corruption. cities that benefit from it are cities that are gonna be closer to the FP than the original capital but have a moderate rank corruption. It also matters on what term of time you evaluate. On the long term, it is better to place it slightly further because you can expect cities to become less corrupt by possibly democracy, courthouses and police stations. I tried to affect cities that will have less than 50% rank curruption under republic.

You can also check my game to see where i have put it, but it is a sid game on normal size map, the low the difficulty and larger the map (in other words, higher OCN) the farther away you should place it.

you can find my post in this thread:
http://forums.civfanatics.com/showthread.php?t=92943&page=2
 
In general, since corruption is somewhat level-dependant, a good choice is:

1) A great City spot. The benefits for the sourrounding cities aren't that large, so this is a main factor.
2) Corruption: Best benefit is when that city has between 30 -50% corruption with a Courthouse. That way, all yout cities between FP and Capital effectively become core cities, at least with PS and a few Policemen.
 
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