pk
Level 15
Level 15

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@BillTax ,  the real issue here is  (a)  Tax Treaties address ONLY  "Income Tax"  and  (b) whether NIIT is an income tax i.e. it is associated  with an foreign source income that is  taxed by both contracting countries..    Recognizing  that the underlying Foreign Source income  that is the causal factor  for attracting the NIIT  ( an additional tax ) in addition to the normal & allocated  US tax liability,  it is arguable  ( based on exact facts  ) that this should be treated as part of the double taxation.   I have not yet read through the  tax court opinion / analysis, but  I would feel comfortable  in using NIIT  as an additional tax  that comes under  "income tax " but to the extent that the income itself is foreign source.

 So  an allocation  of  the NIIT is required  ( i.e.  identify that part of NIIT that is being imposed on the foreign income)  to sustain a logical argument that this is an additional and income tax  ( and not an excise or other taxes that are generally outside the domain of  tax treaty.

 

I will  definitely  study the tax court opinions  -- exact logic followed by the court.

For purposes of the form 1116, you have  probably go into forms mode to get the desired results  ( this is because in general TurboTax -- and others -- all use the Foreign source income  to World income ratio  to allocate  US tax  on the foreign source income  ( but  the computation probably does not include the NIIT as part of the computed tax liability ).

 

Does this make sense ?