I really appreciate your explanation! I've gone through the process you described, this time saying No to the "No other income or expenses", which I tried to complete but ran into a snag I'd asked about in this forum a few weeks ago.
I should mention that all my foreign income is passive from a RIC.
TRP International Discovery reported a significant Box 2a cap gain. In the instructions from TRP with the 1099-DIV, it said to compute the foreign source amount "multiply the amount in Box 1a of your Form 1099-DIV by the “Foreign source income %”. There is no mention of box 2a cap gains. The answer I got about that in this forum was that the cap gain did not include any foreign income. That seems strange for an international fund, but I went with that. Is this correct? If so, then the $20,000 threshold is moot for me.
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Update: The explanation I got from ChatGPT made sense to me:
Capital gain distributions (Box 2a) are different
Box 2a reflects net realized capital gains of the fund itself — sales of securities inside the fund.
For foreign tax credit sourcing:
Capital gains are sourced by the fund’s tax residence, not by where the underlying securities are located.
A U.S.-domiciled mutual fund (like TRP International Discovery) is treated as a U.S. person.
Therefore, its capital gains are U.S.-source, even if the gains came from selling foreign stocks.
👉 Result: Foreign source amount for Box 2a = $0, unless the fund explicitly says otherwise.
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Still, that left me with the question about how to handle TT insisting on entries computing the allocation ratio for Deductible other interest. Since my investment interest expense is zero, the ratio doesn't matter.
