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nc001
Level 1

How do I inroduce foreign capital gains and losses in the Foreign Tax Credit (FTC) for 1116?

I had some stocks in a foreign country, some of of them I sold

Per other posts,  I have to use the Worksheet A (in my case) of 1116 instructions to calculate the adjusted capital gain or capital losses that I have to use for that section, and they'll go to 1116. Sometimes the worksheet tells me I have have some capital gains that go to line 1a, sometimes that I have capital losses that go to line 5

 

I go to the Foreign Tax Credit section, passive category and the right country.

For capital gains, it looks I have to introduce them when Turbo Tax asks me for ' Other Gross Income'

For capital losses, it looks I have to introduce them when Turbo Tax asks me for ' Foreign Losses' (as a positive number).

 

What puzzles me is that Turbo Tax allows me to fill both, but according to the worksheet A, I can only have capital gains or capital losses. Is it a bug on TurboTax, that should allow me to fill only either one or the other?

 

Also, one section asks me for ' 'Foreign qualified dividends and lt capital gains'. When I introduced this quantity, it's used correctly to calculate the amount on 1a as qualified dividends adjustment (by reducing qualified dividends by a factor, as instructed in 1116). But why does it ask for 'lt capital gains'? Per 1116,  capital gains are adjusted differently (whether ST or LT).

 

IF those are just little glitches on TurboTax, it would be nice to fixe them, but please clarify in the mean time.

 

4 Replies
rogge1722
Level 8

How do I inroduce foreign capital gains and losses in the Foreign Tax Credit (FTC) for 1116?

I 'm not sure what you mean you sometimes get a gain and other times a loss.  The instructions state to combine your gains/losses  and enter the results on line 1.  The instructions also state to  complete the worksheet only once. 

 

With regard to the "foreign dividends and lt cap. gains",  it is referring to the "capital gains distributions" from the 1099-DIV, box 2a that are foreign sourced. 

nc001
Level 1

How do I inroduce foreign capital gains and losses in the Foreign Tax Credit (FTC) for 1116?

Sorry.. But 'sometimes' I meant perhaps one year I have a loss, perhaps one year I have a gain. It depends what the worksheet (A o B) tells me each year. But TurboTax allows me to introduce both a gain and a loss (by gain I mean what the worksheet tells me to add in line 1a, and by loss what the worksheet tells me to add in line 5). This seems incorrect, I should only introduce a gain or a loss, no?

 

In which TurboTax sections do I enter that capital gain  and in which TurboTax section do I enter the capital loss?

 

For a US 1009-DIV, a capital distribution (From a fund for instance), how would I know what portion if a foreign capital distribution. The Tax statements only typically mentions 'QDI eligible foreign income'. PErhaps capital distributions are included there; not a big deal, since they are small

 

If I enter a 'fake 1099-DIV' for a foreign fund, I don't think it would apply. You have to tax those a a PFIC.

 

rogge1722
Level 8

How do I inroduce foreign capital gains and losses in the Foreign Tax Credit (FTC) for 1116?

It appears that Worksheet A is structured so that gains are reported on f1116 but losses are ignored.

Worksheet B does provide reporting a loss and a gain for a single f1116 if there are both short term and long term amounts to be evaluated.

 

With regard to 1099-DIV, if  there is any foreign amount in box 2a, it will be stated in the payer's supplemental information, otherwise it is all domestic.

nc001
Level 1

How do I inroduce foreign capital gains and losses in the Foreign Tax Credit (FTC) for 1116?

Don't understand.

 

Let's say I fill worksheet A. and I don't qualify for the adjustment exception.

 

Sometimes the instructions tells me 'include the loss on line 5 of the Form 1116'. I understand I have to introduce this number when Turbo asks me for 'Foreign losses'

Sometimes the instructions tells me   ' include that positive amount on line 1a of the Form 1116'. Where do I introduce that quantity?  If I add it to the section  'Foreign qualified dividends and lt capital gains', then line1a gets this quantity added multiplied by 0.4054 (this multiplication is not instructed in the instructions of Worksheet A)

 

 

 

 

 

If you can provide me with an example where capital distribution has foreign taxes, it would be great for my understanding. All the funds/ETF I have only mention taxes on dividends on their tax summaries. If you don't know any, it's fine, I understand it's probably a rare event.

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