@PV24 , you have to tell a little bit more on this .
( a) are you a US person ( citizen/GreenCard/ Resident for tax purposes )? Or NRA ?
(b) which country or countries are we talking about? Are you a citizen of that country ?
While I await your answers and making a few assumptions:
1. Generally instructions for ( at least for this form 1116) forms , often miss the nuances because of trying to cover all ;possible situations.
2. Note what you are trying to achieve with form 1116 ----- mitigate /extinguish double taxation on the same income ( by US and the other contracting country ).
(3) Thus what the form asks for are "gross" foreign source incomes from each of the countries involved. The term "gross " here is subject to interpretation . but keeping in mind what you are trying to achieve would mean that this is Gross { implying net of gains and losses from the same country and of the same type of income source ) income before considering foreign taxes paid for this income stream.
(4) These "gross" incomes from each country is then divided by the world income I.e. income from all sources ( US Gross income plus incomes from each of the foreign countries -- note that the US income is also before taxes imposed/withheld ) to create a ratio so the total US taxes can be allocated to each of the foreign income streams.
(5) As you are surely aware , per the "double taxation clause" requires US to give credit for the taxes paid to a foreign taxation & contracting country. US does this by recognizing dollar for dollar foreign taxes paid, but the allowable credit for the year is the LESSER of Foreign Taxes paid and US tax on the same income.
Does this make sense or am I muddying the water ?
Is there more I can do for you ?
