On the Federal Form 1116, Part II, TurboTax is reducing the total taxes paid (column U) by the distribution percentages to the beneficiaries. Then it is distributing a portion of the foreign taxes paid to the beneficiaries on their Schedule K-1s. This is noted in the data source information:
"The sum of columns (q), (r), (s), (t) for Lines A, B, and C, multiplied by the estate's or trust's portion. The estate's or trust's portion is 1.00000000 minus the beneficiaries' portion."
When I read the instruction book for Form 1116, it does not mention multiplying by the trust's portion. However, this is a general form for individuals, estates, and trusts.
Reviewing a previously completed 1116 by a CPA, the CPA did not apportion the foreign tax to the beneficiaries on form 1116 and not did he update the Schedule K-1 Line 14, B to distribute the foreign tax paid information to the beneficiaries.
Is distributing foreign tax paid a choice for the tax preparer? Is there a correct method (distribute or keep in the trust) for foreign taxes paid?
Thoughts?
