I have a related question.
I sold an investment property located in a foreign country and paid Capital Gains Tax in that foreign country. The property has carried forward Passive Activity Losses which TurboTax (TT) has tracked in the 14 years since I purchased the property. I have always indicated in TT that the property was located in a foreign country, including this current year.
When calculating the Foreign Tax Credit on Form 1116 Part III, TurboTax interprets the carried forward losses as US losses, not foreign. The total income from sources outside the US on Line 15, is overstated by the carried forward loss. As a result, the "ratio" number at line 19 is 1.0000 which can't be correct as I have US sourced income.
Therefore TT fully utilizes the Foreign tax Credit in this current year, which is to my advantage, but not correct.
Does anyone know how to correct this error in TT?
Thank you
