For foreign tax credit, what do I list for country?

[Diane3]

For foreign tax credit, we have paid $770 foreign tax on 11 dividends, 9 of which are common stock and 2 RICs, must I do 4 pages of form 1116 to separately list each or can I combine in 1 entry, and if so, what do I enter for country?

[rogge1722 · Accepted solution]

On f1116, each column represents one foreign country. You have 2 RIC's; that is considered as one country. You would sum the income and the taxes paid on both as if they were only one. The next step is to identify the source country for the individual stocks. Here is how to do that:

In addition to the 1099-DIV, the broker/payer normally issues a document usually referred to as “Statement of Additional Information” or “Year-End Summary Information” or similarly titled.  With this document, the starting point is the Foreign Tax data.  It will list all the companies, the country and the tax paid by each company.  Then cull through the qualified and unqualified lists to locate each company and extract the dividends paid.

[Diane3]

So you are saying I must do 4 pages (10 columns) then of 1116? I was hoping I could use "various" as 1099-DIV states for foreign country, but couldn't find anything within IRS instructions that says one can do that

[rogge1722]

You would do 10 columns if you know that you have 10 distinct foreign countries  So far you know with certainty you have one country; "RIC". I am assuming that you know that both RIC"s include foreign income in the dividends you received.

The IRS instructions clearly state that they want the info for each country. Various would be used in situations where it is impossible to identify the source countries.

[Diane3]

Thank you rogge1722! One more question...should I be including a column for dividends from the United Kingdom since they would be part of our gross foreign source income, even though we paid no foreign tax to the country?

[rogge1722]

Yes, the IRS wants all foreign income to be included even though they pay no tax. This is advantageous. The more foreign income reported, it increases the foreign tax credit limit and that means you can utilize more of the foreign tax paid as a credit.

[Anonymous]

I came to the same realization that I need to include the UK dividends in a column to raise the credit limit and offset overwithholding on the dividends of some other countries.

Here's the trouble: I use the "break the 1099-DIV into separate pieces" trick to get Form 1116 to place the countries into each column. TT online won't let you select a 1099-DIV that has zero in box 7 (which is the case for the UK fake 1099).

The workarounds I've figured out are

1) Ignore the IRS instruction that says to list every country in a column and simply group everything under Various or RIC. Given I have only US-listed listed stocks (or ADRs) coming in on one Schwab 1099-DIV, I doubt the IRS would notice or care.

2) Enter a fake $0.01 into box 7 of the UK fake 1099-DIV to make it selectable in the Form 1116 interview questions. I would probably subtract $0.01 from one of the other box 7 to balance the overall numbers with the true single Schwab 1099-DIV.