Circular error in Foreign Tax Credit Computation Worksheet

[bumbleb]

I am aware that an adjustment to qualified dividends and LT Capital Gains is required if the following is true.

- You have foreign qualifying dividends or long-term capital gains totaling more that $20,000, OR
- Your total income exceeds the following amount for your filing status:
  - Married Filing Joint or Qualifying Widow(er): $223,050
  - Single: $183,250
  - Head of Household: $203,150
  - Married Filing Separate: $111,525

But I get an error if I change lines (1i) Section 1250 (25%) Capital Gains and (1j) Collectibles (28%) Capital Gains to be the value that TT says is the minimum because they then add up to more than line (1m) Qual. Dividends and LT Capital Gains.  How do I fix this error in TT? 

For reference, this is from Part 1 - Taxable Income (Loss) of the worksheet

1 Gross income:

a

b

c Interest and Dividends from Schedule B

d From Schedules K-1

e From Form 2555 foreign earned income

f Unadjusted gross income this category

g Ordinary Income

h Qual. Dividends and LT Capital Gains

i Section 1250 (25%) Capital Gains

j Collectibles (28%) Capital Gains

k Adjustment required for QD/LTCG

l Net Qual. Dividends and LTCG

m Adjusted gross income this category

[rogge1722]

Is 1h equal to or greater than $20,000?

[bumbleb]

no. it is around $200

[rogge1722]

Here is a suggested workaround. Add up 1i and 1j and add that to 1h. As long as 1h is less than $20,000, it should not have any adverse effect which can be verified if 1m does not decrease.

[bumbleb]

I cannot increase 1h.  When I try to increase the value of "Foreign qualified dividends and l.t. capital gains", TT gives the error "This field should be no more than $225."  $225 is the "Total foreign income for this category", i.e., for passive income and China in my case.  I assume that Total foreign income is for the country.  Or should it be the sum for all countries?

[bumbleb]

I increased the Foreign Dividends Received from $225 to $675 in the interview to allow for the sum of 1i and 1h.  But all that did was for TT to want 1i and 1j to also be $675.

[rogge1722]

If 1i +1j is the same as 1h, it should not cause an error.

[bumbleb]

1i + 1j is not the same as 1h because TT wants 1i, 1j, and 1h to be all the same value.  This means 1j + 1j will be 2x 1h.  

[bumbleb]

To recap, here are the steps I followed:

(1) Create a dummy 1099-DIV because this is not the first country for the 1099-DIV.  Enter following values:
Box 1a (Total ordinary dividends) = 0
Box 7  (Foreign tax paid) = 22
(2) Click continue to get to Report Foreign Dividends.  Enter following values:
Foreign Dividends Received = 225
Select dividends are from "Other source".  Click continue and enter:
Foreign Country = ABC
(3) Click on "Deductions & Credits" and click Edit for Foreign Taxes.  Continue until the page "Any foreign source qualified dividends or long term capital gains?"
(4) TT shows:
Total foreign income for this catefory under column for country ABC = $225 (This value cannot be changed)
Foreign qualified dividends and lt capital gains = 225
(5) Make sure entries for next two lines are zero
Foreign unrecaptured section 1250 (25%) gains = 0
Foreign collectible (28%) gains = 0
(6) Click on Federal Review to check the tax credit.  TT shows a todo for review.  Click button to review.
(7) TT shows Check This Entry page with message "Collectibles (28%) should have a value of at least $225".  Enter value:
Collectibles (28%) gain = 225
Click continue
(8) TT shows Check This Entry page with message "Section 1250 (25%) should have a value of at least $225".  Enter value:
Section 1250 (25%) gain = 225
Click continue
(9) TT shows a todo for review.  Click button to review.
(10) TT shows Check This Entry page with message "Section 1250 (25%) plus 28% collctible  should not exceed total Qualified Dividends and Long Term Capital Gains" which is $225 - see step 4.  This is why I called this a circular error.

Note: on the Check This Entry page, the worksheet shows:
k Adjustment required for QD/LTCG = -134
l Net Qual Dividends and LTCG = 359
m Adjustment gross income this category = 359

[rogge1722]

I can only suggest two things. First bring up the f1116 wks. In 1i and 1j for all affected columns, insert a zero. if that doesn't work, then bring up the dummy 1099-div and replace the zero in 1a with $1.00.

[bumbleb]

I still get the same errors.  I guess I'll have to forego the credit.  I've been doing form 1116 with workarounds for many years now so something is different this year.  Wish TT would fix it for once and for all.  Thanks for your help though.

[cdbmkenirsk11]

how on earth do I "bring up the worksheet" ? 

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