@kcarterco just to replicate the issue you mentioned regarding form 1116 line 3e ( world income ),:
I created a new return ( on Windows desktop Home & Business ), particulars being:
(a) Filing ...
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@kcarterco just to replicate the issue you mentioned regarding form 1116 line 3e ( world income ),:
I created a new return ( on Windows desktop Home & Business ), particulars being:
(a) Filing MFJ, husband working, wife home-maker
(b) W2 income of $100,000
(b) Foreign interest income of US$20,000, Foreign Taxes paid US$4000, Country --Germany
(c) Income entries normal procedure, small amount of refund
(d) Chose Foreign Tax Credit --- form 1116 shows world income as US$120,000
(e) FTC computed correctly.
(f) Now ( just for kicks to simulate your case ) went back to incomes and entered 1099-MISC for US$1500 in Prize/Award income. Form 1040 line 11 got adjusted.
(g) Went to forms mode again and checked form 1116 and the world income now is indeed US$121,500 ---
So my conclusion is for what ever reason, I cannot confirm the existence of the issue you are reporting. My version of TurboTax is updated as of yesterday ( Saturday the 14th. of March ).
All I can say therefore is that if, and only if, your version is fully up to date and still shows this behavior, then something else is going on.
Another point you made in your post about capital loss impact on the world income and therefore line 3e on form 1116. After thinking about it, I would like to point out that form 1116 is for the purpose of identifying the amount of tax imposed by the US on the doubly taxed income. This is done ( and is one reasonably fair way ) by first taking the raw world income and that from the foreign sources to create a ratio for applying the deductions and adjustment in a ratiometric fashion ( thus creating taxable amount from each source). This is then used to allocate the total tax on world income to the foreign incomes.
This is because per most tax treaties, US has to recognize / credit the total foreign taxes paid on the doubly taxed foreign income and US does this but allows credit ( for the year ) only to the extent it taxes that income. This is further affected by FTC being a Non-Refundable Credit.
Is there more I can do for you ?