How do I determine total investment assets on Form 1116 so I can allocate investment income expense to foreign income?

[pk]

@sweerkaul  I see where you are  and this is caused by  your choosing to use itemized deduction -- I used standard deduction and thus did not see this  ----- so the options are   (a)  use standard deduction for your return , if that is to your advantage  OR (b)  if you are using  itemized deduction then your  

     (1) BASIS for the  foreign dividend income  ( assuming that this is from a mutual fund that  has invested in these  stocks/bonds in Israel ) is  your total  investment i.e. cost of purchase of  the Mutual shares plus  any re-invested dividends from the mutual funds etc.  multiplied by the  percentage of the bonds investment in Israel --- you will find this percentage  in the backup documentation from the broker or  ask the broker  that manages your account.

      (2) BASIS for the interest income is  your total  savings  at the Indian bank that is giving you the  interest.

Does this make sense ?

Stay safe 

Apologies for the delay in response

pk

[sweerkaul]

@pk Thank you for responding back .

Based on your reply , I guess it's now clear for me how to calculate the basis for the interest income from India. However for clarity let me put an example. Assuming I have a total of $ 100 in my foreign saving accounts and  $ 20 is the interest which has been withheld ( foreign tax paid ) by the Government of India . Does this means for interest income from saving accounts I will answer both questions as :

Adjusted Basis of Investment Assets Generating Foreign Income : $ 100

Adjusted Basis of total investment assets  : $ 100

Regarding my 1099-DIV , I am getting it because I directly own a stock (not mutual fund) on US Brokerage for a company which is Israel based. I guess let me put an example here also for clarity . Assuming I have invested $ 100 in this stock which has generated  $ 40 as the dividend and $15 is showing as foreign tax paid on my 1099-DIV. Based on these numbers above , is there any math by which I can now calculate the below basis questions for this dividend income ?

Adjusted Basis of Investment Assets Generating Foreign Income : 

Adjusted Basis of total investment assets  : 

[pk]

@sweerkaul 

for the interest case , if your account value was $100, which generated $10 interest and was taxed $2 then   for 2020  -- 1. your basis is $100 ; adjusted basis is also $100; 2. your foreign income is $10 and your foreign taxes paid is $2.   For 2021 tax year, if you leave your earnings in the account then  your adjusted basis  would be $120  

for the dividend case,  if you  bought stocks  for  $100,  that declared  dividend of  $40 and  Israel taxed  you  paid was $15, the for 2020  tax year  you basis  and adjusted basis is  $100, adjusted basis  is $100.  However, if the stock/bond also gave you a capital return of $10 in addition to above then  your basis would be  $100 but your adjusted basis would be  $90  ( $100 less return of capital $10 ).

Does that make sense ?

BTW -- from your  visible name , I am assuming that you are from Srilanka  or  similar places in the Indian Ocean --- just curious

Stay safe 

[4601585]

I am having the same issue as described in this thread. Seems like there was no resolution for how to determine total investment assets on Form 1116.

I have a Federal Check This Entry error - Form 1116(COPY1) -- FOREIGN TAX CREDIT Comp Wks: Adj Basis of Tot Inv Ast must be entered. How do I calculate this? What types of assets does this include? I need to enter it (cannot bypass with simple calculation for under $600 etc). The foreign income is all through dividends earned from holding ETFs such as VWO and the gross foreign source income exceeds $5,000. So it seems form 1116 line 4b must have interest expense (which is already imported). The question is around how interest expense is apportioned separately using an “asset method.” Our only foreign income sources are of passive income type and through ETFs only and not K1 etc

Question 1: Should the numerator basis (basis for all foreign income generating assets) be basis for all such assets owned owned as of Dec 31 2020 (open and closed lots)?

Question 2: Should the denominator be basis for all assets held in all taxable accounts as of Dec 31 2020 (even those simply being held for future growth) no matter when they were purchased). Or is it only all assets generating dividends? 

See screenshot below. Thanks for your help. 

[Jazzun1976]

Thank you for the information, but my question is a little different. In my case, when I am at the Tax Forms to Revisit it says, "This is just a quick reminder that we need to work on the tax forms in your return that were previously under construction. We've listed them below. If your forms still aren't available, we'll help you complete them on the dates shown."

Form 1116 is the only form missing, but NO DATE is shown as to when it will be available.

[MichelleLO]

Form 1116 is currently scheduled for release on March 3, 2022. You can monitor the status of the form in the below TurboTax help article. If the form becomes available sooner than the currently published date, the article will be updated to reflect the new availability date.

IRS forms availability table for TurboTax individual (personal) tax products

@Jazzun1976

[mminderbinder]

I am having the similar issue.  If my deductible interest is zero, why is there a requirement to include the adjusted basis of foreign and total investment assets.  There is nothing to allocate.  Bug on the logic in my opinion.

[DaveF1006]

To clarify, are all your investments foreign?

@mminderbinder

[mminderbinder]

@DaveF1006 

No, only a portion are foreign and I have no investment interest expense.

[rifi]

I am very impressed with the advice (and the tone with which it was delivered) from @pk on page 1 of this discussion at 7:43 PM on Aug. 20, 2020. 

Very useful advice on using the Community forums here  - how  to receive a useful, enlightened response focused on the question being posed. 

[crsimon53]

In reading the instructions, it seems to me there are two possibilities.  The instructions ask for total of stock generating US income and then assets generating foreign source income.  The likely correct answer is to figure the total of all holdings that throw off dividends and interest.  This is not easy to do.  It involves adding up all your mutual funds and stocks and bonds that throw off divs and interest.  Second way is to just add up all your investments.  This is much easier.  These numbers are asked for so that the form can calculate allocation of interest expense etc.  I didn't claim any of those items so I just listed total assets.  Since the amount to be allocated is 0, these numbers don't change anything.  That was my solution.  Lets face it - Form 1116 is a mess.

[mminderbinder]

But if there is no purpose for an allocation because there are no elements to allocate, what is the purpose?  Should not be required when there is no allocated expenses to apply to the different types of base.

[jtax]

[thought better of it and removed my response]