@DaveF1006, thank you for taking the time to provide a thorough and helpful explanation. Based on my understanding and testing, it seems that there are two scenarios to consider in order to understand the behavior of TurboTax on the screen entitled “Any foreign source qualified dividends or long term capital gains?"…
Scenario 1: Form 1099-DIV, Box 1a = Box 1b
- TFI must equal the value of FQD entered on the screen entitled “Any foreign source qualified dividends or long term capital gains?" because, by definition, all dividends are qualified.
- This TurboTax behavior remains the same, whether FQD are adjusted or not.
- For reference, the adjustment is described in the IRS publication “Form 1116 Instructions” in the section “Qualified Dividends and Capital Gain Tax Worksheet (Individuals),” and the adjustment amount appears on the Foreign Tax Credit Computation Worksheet, Line 1k (“Adjustment required for QD/LTCG”).
Scenario 2: Form 1099-DIV, Box 1a > Box 1b
- TFI can be greater than the value of FQD entered on the screen entitled “Any foreign source qualified dividends or long term capital gains?", in contrast to Scenario 1.
- This TurboTax behavior remains the same, whether the FQD are adjusted or not.
- For reference, a helpful article illustrating this scenario is: How to Enter Foreign Tax Credit Form 1116 in TurboTax.
Dave, can you kindly confirm (or correct) my understanding – for the benefit of all who may find this thread at a later date?
P.S.: Abbreviations used herein…
- TFI: “Total foreign income for this category” as displayed on the screen entitled “Any foreign source qualified dividends or long term capital gains?" when completing the Foreign Tax Credit interview. It is also known as “Foreign dividends received” as entered on the screen “Tell us about your foreign dividends” when inputting the Form 1099-DIV information. The amount is equal to Form 1099-DIV Box 1a multiplied by a “foreign source income percentage” specified in the supplemental tax reporting information provided by the mutual fund company.
- FQD: “Foreign qualified dividends and 1.t. capital gains.”
- Form 1099-DIV, Box 1a: Total ordinary dividends.
- Form 1099-DIV, Box 1b: Qualified dividends.
