"Qual Div and LT Cap Gains" for form 1116 Vanguard Foreign tax credit

[johnsantaclara1]

Dear experts,

Should I enter "QDI eligible foreign income" for "Qual Div and LT Cap Gains" for Vanguard or should I enter the value TT prompts as "Form 1116 (COPY 1)--- Foreign Tax Credit Comp Wks: Qual Div and LT Cap Gains should not be larger than the unadjusted gross income for this cateogy

Qual Div and LT Cap Gains:$XXXX

In my "2019 Foreign tax Paid" form from Vanguard , QDI eligible foreign income= $YYYY

I am super confused if I should enter XXXX or YYYY or something else..

Or should I use RIC instead of Various for country? In that case, it doesn't seem to ask me any questions. Is that accurate?

Thanks so much for your help!

[pk]

@johnsantaclara1 , first  from your two posts on the same subject, what I get is that  (a) you have a 1099-DIV or Broker's consolidated  report from Vanguard; (b) you have  dividends/LT capital gains of $YYYY for the year 2019; (c) you have foreign taxes paid  of $XXXX; (d) the amount of foreign taxes paid is higher than safe harbor amount -- $300 for single filer , $600 for MFJ thus requiring the use of form 1116  and now your question is which of these amount go where on form 1116

From what I find on web it seems that Vanguard in the past has reported  qualified dividend as  " total foreign dividend of "YYYY" and Qualified  foreign dividend as   Foreign dividend  multiplied by  a factor "0.FFFF"

Thus for US tax purposes  --- 1. you have total  foreign dividends of $YYYY;         2. You have foreign qualified  dividend  of $QQQQ ( equal to $YYYY  multiplied by 0.FFFF);    3.  for form 1116 your foreign taxes paid is $XXXX on total foreign income of $YYYY.

Thus this make sense ?  Do you need more help  ( please provide actual figures  )

pk

[johnsantaclara1]

Here's where I am struggling:

TurboTax asks for:

a) "Qual Div and LT Cap Gains" - don't know where to find it,

b) Country : Should I choose RIC or Various? (No country specified in Vanguard form. Foreign tax was paid for Vanguard TTL INTL STK ADML- (VTIAX)

c) Should I choose State as Multiple?.(Vanguard form has state as N/A)

 So don't know what to fill for above.

Vanguard "2019 Foreign Tax Paid" form only has this information: QDI eligible foreign income = $4447.09, Foreign income = "6771.47" , Foreign tax = 496.

Vanguard 1099-Div has some numbers such as "Total Ordinary Dividends", "Qualified Dividends", "Total capital Gains Distr", "Section 199A dividends", "Foreign tax paid = 496"

So, please advise what to fill for a, b, and c above from that info. Thanks a lot again!

[rogge1722 · Accepted solution]

In order to clarify and make it easy to see how these dividends inter relate, open up a new spreadsheet.

Column A is used for both qualified and unqualified dividends, aka “Ordinary Dividends.”

Column B is used for qualified dividends only.

In cell A1, insert the worldwide Ordinary Dividends. That is the amount in the 1099-DIV, box 1a. In Vanguard Speak, this is “Total Ordinary Dividends”.

In cell A2, insert the foreign source Ordinary Dividends.  In Vanguard Speak, this is “Foreign Income.”

In cell A3, subtract A2 from A1. The result is U.S. sourced Ordinary Dividends.

In cell B1, insert the worldwide Qualified Dividends.  That is the amount in the 1099-DIV, box 1b.  In Vanguard Speak, this is “Qualified Dividends.”

In cell B2, insert the foreign source qualified dividends.  In Vanguard Speak, this is “QDI eligible foreign income”.

In cell B3, subtract B2 from B1.  The result is U.S. sourced qualified dividends.

Note that each cell in column A must be equal to or greater than the corresponding cell in column B.

You also have in the 1099-DIV, box 2a, Capital gain distributions.  All you know is that is worldwide.  Unless Vanguard states how much is foreign, consider it as domestic and will have no bearing on foreign transactions.

When you go thru the TT interview, it will initially ask for “Foreign Source Income”.  That is amount in cell A2, foreign source Ordinary Dividends.  Later in the interview, depending on your situation you may be asked to insert “any foreign sourced dividends or long term capital gains”.  That is the amount in cell B2.  The long term capital gains is referring to any foreign component in the 1099-DIV, box 2a, if any.

With regard to the country, it is RIC; (regulated investment company). 

With regard to the State, I am not able to address that issue.

[johnsantaclara1]

Hi @rogge1722 , Thanks a lot! This is excellent explanation, I am saving your notes for future. 

[TaxBloke]

Hello,

Can you please tell me what 7d is in your formula? (1b+7d -1a). I get that 1b and 1a is directly from my 1099-DIV.

Is 7d = Foreign ordinary dividend income?

I used your instructions and have A1, A2 and A3, as well as B1, B2 and B3 calculated.  I need the number to enter in this form so I can keep going with TT.

Thanks. This is my last stumbling block before I can submit my taxes. 

[DaveF1006]

To clarify, where is (1b+7d -1a) coming from?

@TaxBloke