Due to owning dividend paying stocks from multiple countries in several of my brokerage accounts, I have to fill out form 1116 this year for seven countries. For some of the countries I am having (long-term) capital gains and capital losses due to stock sales (no foreign taxes were withheld on the sales).
The dividends were entered in Turbo Tax (Deluxe) as 1099-DIVs and the sales as 1099-Bs. On the 1116 forms I am using income category "passive income".
Here's a reduced scenario of what I'm facing:
- Brokerage account A: Dividend on Spanisch stock ABC of ca. $85 with foreign tax withheld of about $13.
- Brokerage account B: Capital loss on sale of (different) Spanish stock DEF (several thousand dollars). No foreign tax withheld on sale.
- Brokerage account C: Dividend on a Danish stock with foreign tax withheld. Capital gain on sale of part of this stock with no foreign tax withheld on sale.
Now my questions:
- I am currently reporting the (long-term) capital loss from account B in Part I, field 5a ("Foreign losses for this category") of the "Foreign Tax Credit Computation Worksheet" in the column for country "Spain" (which then flows down to the corresponding column Form 1116, Part I, field 5).
Is that correct? If not, how should I report this capital loss on Form 1116 or the worksheet (if at all)?
- I am currently reporting the (long-term) capital gain from account C in Part I, field 1a (under the title "Long-Term Capital Gains") of the same worksheet in the column for country "Denmark" (which then flows down to the corresponding column in Form 1116, Part I, field 1a).
Is that correct? If not, how should I report this capital gain on Form 1116 (or the worksheet) (if at all)?
- The overall foreign tax withheld for "Spain" is only about $13 on dividends of about $85, but the capital loss is several thousand dollars, which currently reduces my foreign tax credit by several hundred dollars.
Is is permissible to not claim the foreign tax credit for certain countries (in my case "Spain"), because it would actually increase my foreign tax credit (because the capital loss for "Spain" would no longer need to be reported)?
Or must I report all countries on that form for which taxes were withheld?
