Form 1116 Foreign Tax Credit Computation when foreign source exceeds $20,000
This year I have foreign source ordinary dividends of $28,000 in which $1900 of foreign tax was paid. I choose to take the credit. These are linked to a single Form 1116 and Foreign Tax Credit Computation Worksheet. Incidentally, I am itemizing deductions this year.
TurboTax is requiring an entry on the Worksheet in Part I 4 b 1 b and c. These appear to serve to limit investment interest expense deductions, which is $0. In other words, the allocation ratio doesn't matter because the result will be $0 in any event. To get past this form error, I put in $0 and $1 respectively for b and c. I cannot put $0 in c. This is not covered in any interview or tax help.
Meanwhile, I think I do have greater than $20,000 in foreign source income, especially when adding in cap gains. Nevertheless, TurboTax is checking the box that says "Total foreign source qualified dividends and capital gains is less than $20,000". At no point has TurboTax asked for the amount of foreign source *qualified* dividends. The amount in Box 1b on the 1099-DIVs are not necessarily limited to the funds that involve foreign source. I've not entered the foreign source qualified dividend percentage, yet TurboTax thinks it has what it needs.
Should I just relax and trust that it knows what it is doing?
