2. however, if I still had 'unused capacity' in that TY2018, but I dont want the hassle of filing an ammended ty2018 return... can i voluntarily lose that 'unused capacity' and just subtract it from my TY2019 excess and carry fwd that lowered amt into TY2020?
to not file an amended return means that you don't get the refund you are entitled to. however, if it's small you may not want to bother. I've seen where the IRS never questioned a reduced carryforward where no amended return was filed.
3. why do you say that c/f rarely used ? is it because once you start generating passive dividends year after year that create foreign taxes paid that go over the limit... that you never get a chance to use them in the carry fwd years?
that's exactly what I'm saying. the issue is that the effective rate of foreign taxes on net foreign income is generally higher than the US effective tax rate on the same income which generates the carryover. I have had some rich clients that literally lost $ 000's in FTC because the c/o period expired. the current year FTC is used before the c/o.
note the Simplified Method for FTC which allows a single individual to take $300 of FTC on passive income (dividends interest rents royalties) without filing form 1116. if there is another category form 1116 must be filed for each category.
as to foreign passive income, you are allowed to include even amounts on which you pay no foreign taxes. say you got a foreign dividend from xyz but there were no foreign taxes. you can include the xyz income as foreign income for purposes of the FTC.
generally, when there are foreign dividends and foreign taxes from various companies I lump them together and use "various" for the country.
another way to explain the carryover is it's the effective foreign tax rate on net foreign income less the effective federal income tax rate on taxable income. then the net difference is multiplied by net foreign income. so even a 1% higher ft rate on $3000 of net foreign income will generate a $30 carryover.
even net foreign income is somewhat of a misnomer. it's gross foreign income reduced by certain direct expenses + a portion of your standard or itemized deductions and adjustments to income
