I received $29 Nintendo ADR with $4.4 foreign tax withheld reported on 1099-DIV. That's my only foreign income. Based on the US-Japan treaty, Portfolio Dividends (Individual Shareholders) is typically subject to a 15% reduced tax rate. I believe that's the rate applied to my foreign tax withheld.
One of the conditions to claim foreign tax credit without filing form 1116 is
All of your foreign taxes were: Legally owed and not eligible for a refund or reduced tax rate under a tax treaty
I'm a bit confused with this condition, which of the following two is right?
- I'm already paying the 15% and there is no other treaty to further reduce the rate, so I meet the requirement and I don't need to file form 1116 or
- The 15% rate I'm paying is a reduced rate because of the treaty, so I have to file form 1116 in order to claim the credit
If I cannot claim the credit without form 1116, can I just completely give it up and enter 0 for foreign tax withheld when entering 1099-DIV as I don't want to spend time on form 1116 for $4?
Thanks
