@mbcohen139 while generally agreeing with your post , I do want to make sure of the following:
(a) You a US Person ( Citizen / GreenCard ) having a tax home abroad in a Treaty Country ( i.e. US and that country has a Tax Treaty in effect ) with a "double-taxation" clause
(b) the tax home country taxes your world income as a resident of that country ( i.e. your US sourced income )
(c) US also taxes you under its rules
(d) choose US for claiming/ mitigating double taxation burden
In such a case , you use form 1116 by resourcing your doubly taxed income as " resourced by treaty ", recognize the foreign taxes paid/ levied on this income.
Use of form 1116 results in recognition of the total foreign taxes paid as a credit for US tax purposes. However it limits the allowable amount for the current tax year by lesser of (a) actual foreign tax burden and (b) allocated US tax burden on the same resourced income ( this allocation is done by using ratio of this foreign source income to world income. ). The unallowed / unused foreign tax credit can be carried back or forward.
An exception to the requirement to file form 8833 ( income resourced by treaty ) is allowed for this resourcing for purposes of ONLY double taxation clause.
Does this make more sense ? Or am I still in the weeds ?
pk
