In Canada I filed a section 216 return. Since depreciation was not claimed as an expense in Canada, my net income on the property was positive on the Canadian side. For this income, I paid around $800 in Canadian taxes.
My question is - on form 1116 foreign tax credit, what do I enter box 1a "Gross income from sources within country shown above..."? Is it the gross income from rents collected before expenses or the net income (loss)? And if the latter, in the event of a loss, do I simply enter zero or enter a negative number?
Additionally, what should I enter in box 3d "Gross foreign income"?
Assuming that you are a US citizen/ resident, I would use the simpler approach of expensing all the taxes associated with this rental income ( property taxes , income tax , other city / local taxes etc. ) under the taxes paid on schedule -E and thus avoid the requirement for form 1116. Thus my gross rental income would still be the gross rents in and therefore match with foreign filings and represent actual rents received.
You are aware that foreign rental real-estate is depreciated different than domestic real-estate ( 40 years vs. 27 years -- Turbo takes care of that if it knows that the property is in a foreign country ) .
I hope this helps.