@KarenJ2
Hi KarenJ2 I do not think it is accurate to conclude - that just because one has 2 forms: Regular Form 1116 & AMT Form 1116 it automatically means person is Using OR Not Using Simplified method.
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If you see only 1 form 1116 - In ALL years from the first year you started doing Form 1116 - it means you never needed to deal with AMTFTC so the opportunity to choose - AMT Simplified method or Complex Method - Never Arose as yet.
If you see both forms - In any year from the first year you started doing Form 1116 - they you need to look Deeper at the numbers.
Detailed Explanation Below:
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As per my understanding:
[a] Normally the regular Form 1116 will be generated.
Note: In the Regular Form 1116 the:
Regular FTC Limitation = Tax (without ftc) x [Foreign Source Income / Total Worldwide Income]
[b] ADDITIONALLY
IF you have AMT taxes then you will see: (1) 6251 AMT Tax form (2) AMT Form 1116
Now on the AMT Form 1116 one has to calculate AMT FTC Limitation - i.e. the max FTC allowed for the year, rest you will have to carryforward.
AMT FTC Limitation =
AMT Tax (without any ftc credit) x [Foreign Source AMT Income / Total Worldwide AMT Income]
BUT since in above formula the "Foreign Source AMT Income" is a bit complex to calculate, IRS allows the tax payer to CHOOSE/ELECT to use in its place "Foreign Source Income" - same value that you used in the Regular Tax FTC Limitation numerator. This is called the "Simplified" method:
So your formula becomes:
AMT Simplified FTC Limitation =
AMT Tax (without any ftc credit) x [Foreign Source Income / Total Worldwide AMT Income].
Note: Basically if you do, you will use the same net foreign source income for AMT that you used for regular tax. (The amount on line 17 of your AMT Form 1116 will be the same as the amount on line 17 of your regular tax Form 1116.) You must make the election (to choose Simplified) for the first tax year after 1997 for which you claim an AMTFTC. If you don’t make the election for that year, you may not make it for a later year. Once made, the election applies to all later tax years and may be revoked only with IRS consent. [3]
=====Conclusion====================================
If you see only 1 form 1116 - In ALL years from the first year you started doing Form 1116 - it means you never needed to deal with AMTFTC so the opportunity to choose - AMT Simplified method or Complex Method - NEVER Arose as yet.
If you see Both forms - In any year from the first year you started doing Form 1116 - It does NOT tell you that you have used Simplified method or Not. - you need to look Deeper at the numbers
Note: From what I read - There is No Indicator that goes to the IRS on the Return saying I have chosen Simplified method or not. One has to Look at the number in AMT Form 1116 OR the top of Form 6251 and see if "Foreign Source Income" is being used in the numerator (so it will be matching with same as on Regular Form 1116) or "Foreign Source AMT Income" is used.
And IRS also uses this same way to determine what choice you have made.
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Please comment if anyone think differently to share all our knowledge and correct me if I am mistaken.
