@expat-allover , have read through your post, and recognizing that I am not familiar with on-line version of TurboTax ( if that is what you are using ) , the facts as I get are :
(a) You and your spouse ( both US person) file MFJ
(b) your tax home is Foreign -- Country -1 ( Germany ? )
( c) Your total income for the year -- Foreign -- US$ 75, 000 ( Country 1 ) plus Passive income of US$13 ( Country 2);
(d) You also have US sourced Passive income of US$ 10,000
(e) Country 1 taxed you on world income of US$ 85,013 , to the tune US$ 1700. Therefore US purposes you are seeking recognition of Foreign taxes paid/ accrued of US$1700
To achieve you need to enter two form 1116 -- one active category and one passive category. Also note that your US sourced income has been taxed by Country 1. Therefore you need to do two things
1. Allocate your foreign taxes between active income of US$75000 and the passive income of US$10,013 ---- either pure ratio ( if country 1 uses flat or stepped on taxable income ) OR by category if that country uses category based tax ) .
2. In the passive income form 1116 , your foreign income is US$10,000 ( resourced because country 1 also taxed it ) + Passive income of US$13 ( again because there has been taxed by a foreign taxing authority ).
This should get you and is legally correct. Keep your records and a note reminding yourself that you resourced the US Passive income to country 1 for purposes of form 1116 ( Passive ).
Does this help ?
Is there more I can do for you ?
pk
