@sese having read through your post ---
(a) if you are filing as single then then the safe harbor amount is $300 ( $600 for a joint filer ) i.e. you can use the simplified method and get the whole amount of credit--- no need to use form 1116. Form 1116 , while recognizing the whole amount paid , uses a ratio of foreign income to world income to allow a limited amount for the current year and carry backward or forward the rest of the unused / unallowed credit, assuming that the taxpayer has foreign income in those years.
(b) If your actual paid foreign tax is close to the safe harbor amount for your filing status , it may be more advantageous to claim ONLY the safe harbor amount and forego the filling out and limitations of the form 1116. Also note that the foreign tax credit can only reduce your US tax liability i.e. it is not a refundable credit -- this can also limit how much credit you can get
(c) Interest , dividend , capital gains etc are all passive income as opposed to wages, self-employment/ sole proprietor business etc which are active earnings.
(d)Many mutual funds invest in foreign stocks and will often show the foreign income source as various ( many countries) and is acceptable to the IRS for purposes of computing form 1116
(e) Most foreign dividends are ordinary dividends -- rarely ( i mean rarely ) will these be qualified dividends ---- your broker should be able to tell you this and will be noted on form 1099-DIV / Broker's consolidated report.
Is there more I can do for you ?
