@maitreya137 ,
(a) Should assume that you are US person and have rental property in another country ( India ??).
(b) that you have reported on Schedule-E, your rental income/ US allowable expenses, depreciation etc . ?
(c) You then have moved to Deductions & Credits tab, selected foreign tax credit, and now answering questions for the form 1116 --yes ?
First -- what you are trying to do is compute the doubly taxed foreign source income -- very generally this will be the net income from Schedule-E. The gross income is on line 1 ( should be at least the gross of the rent income -- shown on Schedule-E as gross rents ). Then you reduce this by definitely related expenses etc. Because this form covers all kinds of situations, the language gets hairy.
The simplest way to recognize foreign rental income ( and deal with the actual doubly taxed income ) is to enter ONLY the net foreign rental income from Schedule-E. Use no adjustments ( because these have already been used per the US tax laws to come up with the taxable rental income.
\The follow on portion , should automatically use the type of deduction you are using on your 1040 -- allocate its effects on to your world income and foreign income by creating a ratio of foreign source income ( by type ) to your world income.
Note that at the end what 1116 is trying to do is identify the allocated tax to the foreign source ( & doubly taxed) income. Note while every dollar of the foreign tax paid is recognized , only the lesser of US tax and actual foreign tax paid is allowed as a credit for the year.
Does this help or am I muddying the water ?
You can add more here or PM me ( just NO PII -- Personally Identifiable Information )
Namaste ji
pk
