Foreign Capital Gain and related credit for foreign taxes paid

Forum|Forum|3 years ago
October 4, 2022
2 replies
9 views

I have a foreign capital gain from the sell of real estate in Canada. The gain was around $3,000 and the Canadian taxes on it were about $1,000. I do not see a way to enter this transaction into turbo tax. When I go into the foreign income credit section the only option is to choose a dividend from an investment account. The interview questions do not to relate to my situation. I did enter the gain in the investment income section. But there is no way to designate it as a foreign capital gain and tie the corresponding taxes paid in Canada for the tax credit to the gain.

Do I have to enter this manually on Form 1116 and omit the gain from the Investment Income section. If so how do I go about doing this? What would the category be for the gain (passive category, general, lump-sum distribution)?

Thx in advance.

Best answer by pk_

@aroy0911 , I looked over the US-Canada tax treaty and there is really no assertions that you can make other than relief from double taxation on "alienation of real property". Thus your recourse is to apply for foreign tax credit.

Under federal taxes, under credits & deduction you get to choose foreign tax credit. This will trigger questions for form 1116. There you will asked for foreign source net income -- you enter the total foreign income you got from the sale of the prop. i.e. sales monies less US basis and before income tax by Canada.

This should work and if not , go to forms mode and enter the foreign income associated on the form 1116.

Is there more I can do for you ?

Anonymous_

Level 15

Perhaps @pk12_2 can answer this one.

pk_

Answer

Level 15

This should work and if not , go to forms mode and enter the foreign income associated on the form 1116.

Is there more I can do for you ?

aroy0911Author

Level 2

Thanks for your response. I got on the phone with Turbo Tax and they helped me yesterday. In the form 1116 questions they had me choose the itemized eductions option, which let me enter the amount. I had been trying the other option which required me tie a foreign tax credit to to a divided payment from one of my my investment accounts, which did not apply to my situation. Hopefully this was the correct way to input this.