In the year of the receipt and payment of the foreign tax on dividends, no credit is allowed. The best that could be hoped for is that if you keep track of all of the foreign dividends and foreign taxes withheld from those dividends, then you might be able to take a credit in the year of a taxable withdrawal . Imagine your 401k has $99,700 in it at the time that you take a taxable withdrawal of $3,000. The cumulative foreign source income of you 401K was $2,000 of which $300 has been withheld at source by the foreign country. If it were not for the tax withholding your account would have had $100,000 in it. Your withdrawal = 3% of the pre-tax value of the account. Then 3% of the $2000 in foreign dividends means that $60 of your withdrawal was foreign source income and $9 in foreign taxes were withheld on it. You might be able to take tax credit in that amount and if using form 1116, would list $60 of foreign income and $9 of taxes paid or accrued. I don't know if this second approach is permitted but it treats the domestic 401K or IRA in the same manner as a complex foreign non-grantor trust. which generates taxable income to the beneficiary only in the year distributions are made.
