Form 1116 Worksheet Error for "Deductible other interest

[AhuraMazda]

Form 1116: Foreign Tax Credit Computation Worksheet is asking to enter a frivolous entry in Part 1 - Taxable Income Line 4, b : "Deductible other interest" (1) C: Adjusted basis if total investment assets.

As I have no "Deductible other interest", why would the "Allocation ratio" of "1" gets entered? This is causing the above-mentioned issue

[DaveF1006]

It depends. Will the program let you enter a zero?

[AhuraMazda]

No it does not allow me to enter 0

Problem goes away if Line 4,b,c is 1

I think it is Turbotax Error

[DaveF1006]

I would suggest entering "1" even if it feels to you as being "frivolous. The program is looking to satisfy the "allocation Ratio"

which divides total basis of foreign assets/total basis of total assets. "1" will satisfy this condition, which has no impact on your total tax liability.

Technically, the IRS wants your actual adjusted basis (the cost of your stocks/investments). However, in a "Zero Interest" scenario, the ratio is functionally irrelevant. Tax professionals have used the "Enter 1" workaround in TurboTax for years specifically to bypass this denominator bug, and it has never been an issue with the IRS.

[nswartz99]

I notice that this problem did not happen in Turbotax 2024 or earlier. The 4.b.1.a field is left blank since I did not itemize. This year I itemized and it populates a 0 which causes errors for field 4.b.1.b and 4.b.1.c

Can't you default the fields (b,c) to a 0 and a 1 when the amount for Part I, 4.b.1.a is 0?

[DaveF1006]

Yes, defaulting this to a "1" should clear the error and not impact your return.