Thank you for the detailed answer. I obviously have a few followup questions, feel free to answer them. I fully understand that your response is not a professional advice and will use it on my own risk. And thanks in advance anyway.
You wrote "You are allowed to take a credit for the accrued ("deemed") taxes, even though you will pay them at a later date..." This is really helpful . I sold the property in July 2024, which falls within FY24 - 25 Fiscal Year for India and ends on 31 March 2025. Therefore, I can only file the Indian tax return on or after April 1, 2025, though it might not be possible to file it before the US Tax Day. As such, I might take an extension on my US taxes and take a Foreign Tax credit for the ACTUAL taxes paid on the Indian Tax Return (converted to USD) instead of "deemed taxes". Does this sound reasonable?
You wrote "For California, you will unfortunately have to report the gain as taxable income...". Do I report this separately OR where do I report this in my California return OR does this get automatically derived by TurboTax from my Federal return like my other incomes?
You wrote "...However, you can include the California tax paid on foreign income as foreign taxes paid when calculating your federal tax credit.... You will have to prepare your federal return, then your California return to determine that tax paid. Then you will return to the federal portion to include that additional tax."
I looked at the discussion and tried to digest your response along with the answer provided in that discussion. This is what I understood.
Step 1. I prepare my federal return. In Line 1(a) of Form 1116 is where I report my foreign income (which is basically the Capital Gains on the sale of my property in India, converted to USD).
Step 2. I prepare my California return to determine California tax paid.
So, after Step 1 and Step 2, both my Federal and California returns INCLUDES my normal US incomes PLUS Indian Capital Gain income, right? If this is true, then California taxes also include that portion of the taxes attributed to Indian Capital Gain income? I understand that I have to go back and add this portion of California taxes in Part II of Form 1116. However, I am having a hard time understanding how do I figure out that portion of California taxes attributed to Indian Capital Gain income? Should I do the taxes twice, i.e. one with the foreign Capital Gains and one without and assume the difference between California taxes as taxes paid on the foreign Capital Gain to be deducted as Foreign Tax Credit in Line II of Form 1116?
Again, sorry for the long post. Feel free to answer or not.
Thank you so very much.
