Thank you very much for your effort.
From the text in bold, I understand that only the rule of computing separate tax credit limitations per income category is not needed in the case of the income re-sourced by reason of relief from double taxation.
Indeed, the tax treaty between US and Switzerland (SW) (https://www.irs.gov/businesses/international-businesses/switzerland-tax-treaty-documents) in ART 23, paragraph 2 mentions that US shall allow to US citizens as a credit against the US tax on income the appropriate amount of tax paid in SW. … entered as " income taxes" on US returns.
The publication Technical Explanation Of The Convention Between The United States Of America
And The Swiss Confederation further details how this should be dealt with:
"Since the income described in paragraph 3 is U.S. source income, special rules are required to resource some of the income to Switzerland in order for the United States to be able to credit the Swiss tax. This
resourcing is provided for in subparagraph 3(c), which deems the items of income referred to in
subparagraph 3(a) to be from Swiss sources to the extent necessary to avoid double taxation under
paragraph 3(b). The rules of paragraph 3(c) apply only for purposes of determining U.S. foreign
tax credits with respect to taxes referred to in paragraphs 2(a) and 3 of Article 2 (Taxes Covered)."
Your advice for contacting an expert familiar with tax treaties is duly noted. It is a pity that, for special cases, TurboTax does not offer the possibility to connect directly to an expert familiar with not so common tax code aspects. Waste of time on both sides.
Thank you again.
