@av2799 , whereas others may quite disagree with me -- however, I look at what am I trying to accomplish at the end of the day; 1. Get the most world tax benign situation i.e. least tax load worldwise ( counting both the US and the foreign taxing authorities ); 2. keep it as simple as possible thus reducing my risk of a challenge -- because no matter how strong / correct is one's case, in a challenge one never wins overall.
Particularly in your case of qualified foreign dividend -- even if you are right and can actually get IRS to accept that the amount should be treated like qualified domestic dividend , what is the US tax result ? A reduced tax burden ( capital gain tax rate ), thus reducing US tax levy on this doubly taxed income. If India's tax rate is not specifically and equally reduced ( which it is not ), you now have a case of possibly zero or low US tax on the "qualified dividend" while India taxes it as normal income.
Now look at this situation under the double taxation relief lens. What does that give you --- the allowable Foreign Tax credit for the year is LESSER of US tax liability and that paid to India on the same doubly taxed income. So the best case is the credit of US tax. So if one is trying to increase the US tax liability to get the Indian tax effect reduced to zero , we are going to wrong way.
To this add the situation -- Foreign Qualified Dividend is not common ( because it has to meet certain qualifications ( even if the country is declared eligible by meeting the section 1(h)(11) ) the actual corp/entity needs to meet the requirements ( and not issuing a 1099-DIV, makes it hard to prove the facts of the case ) outlined and is up to the taxpayer / recipient to justify that these are indeed qualified dividends.
That is my take on this issue. Others may see it differently but for me I abhor attention from the IRS.
Is there more I can do for you ?
