In form 1116, the "gross income from all Sources" is not calculated correctly by Turbotax.

[Mike9241]

how do you know? have you read the 1116 instructions for that line? it can be significantly higher than adjusted gross income. 

[Lily_NJ]

Yes, I've read the instructions and calculated the amount as below. It does not match up.

This is total income before deductions and is the sum of:

Form 1040, line 1 plus
Form 1040, line 2b plus
Form 1040, line 3b plus
Schedule 1 (Form 1040), line 1 plus
Schedule 1 (Form 1040), line 2a plus
Schedule C, line 7 (all copies) plus
All gains reported on Schedule D minus Schedule D, line 11, Subtotal Line A(Form 4797, Gain from Part I) plus
All gains reported on Form 4797 plus
Form 1040, line 4b plus
Schedule E, line 3 total plus line 4 total plus
Schedule K-1 Worksheet - Partnerships Box 16, Code B (if it has a value); otherwise income reported on line 1, 2, OR 3 plus any amount on line 4 plus
Schedule K-1 - Partnership Additional Information page 1, Box 11 section,Code A, line 1 (if positive) and line 3 and line 4 and Code I, line 5
Schedule K-1 Worksheet - S Corporations Box 14, Code B (if it has a value); otherwise income reported on line 1, 2 or 3 plus
Schedule K-1 - S Corporation Additional Information page 1, Box 10 section, Code A, line 1 (if positive) and line 3 and line 4 and Code H, line 5
Schedule K-1 Worksheet - Estates and Trusts, Box 14 Code B : Foreign Tax Information section, line 7 (if it has a value); otherwise income reported in Part III lines 5, 6, 7 and 8 plus
Schedule F, line 11 (all copies) plus
Form 4835, line 7 ( all copies) plus
Schedule 1 (Form 1040), line 7 plus
Form 1040, line 5b plus
All positive income amounts on the Other Income Statement.

[rwilsond]

Lily_NJ,

Were you ever able to determine how TT calculated form 1116, the "gross income from all Sources"?

I can calculate it for one of the returns I am working on, but not the other. After spending about an hour on it, including reading the Form 1116 instructions for Line 3e, and looking at the so-called "Smart Worksheet", I also am wondering if TT calculated this correctly. It would be helpful if to see the details of how this was calculated.

[BrittanyS]

Can you clarify if you are using TurboTax Desktop?  If you are, you can review your forms in forms mode.  Click forms in the top right corner.

@rwilsond 

[rwilsond]

BrittanyS,

I am using the "Home and Business" desktop version. Finally, I was able to figure out how to get the same number as TurboTax for Form 1116, Line 3e as follows:

     Total Income, from Form 1040, Line 9

     + Total expenses from my businesses (including "Business use of home " from Form 1040, Sch. 'C', Line 30)

     + Capital Carryover Losses (entered as a POSITIVE amount).

The Capital Carryover Losses (entered as a POSITIVE amount) is what had me confused at first. Of course, it can be more or less than these items for other returns, but this finally worked for mine. 

Unfortunately, my version of TurboTax does not show how Line 3e is calculated. Instead, my version includes a so-called "Form 1116: Foreign Tax Credit -- Smart Worksheet" that does nothing more than show the amount for Line 3e. It gives no clues as how it was calculated. It is not a worksheet, nor is it smart.

[DaveF1006]

Here is how the Foreign Tax Credit is determined.

Your foreign tax credit cannot be more than your total US tax liability multiplied by a fraction. The numerator of the fraction is your taxable income from sources outside the United States. The denominator is your total taxable income from US and foreign sources. Here's an example on how this works.

If your tax liability on Line 24 of your 1040 is $5000, your foreign income is $11,728, and your total income, foreign and US income, is $50,000. The foreign tax that can be claimed for this year is ($5000)($11,728/$50,000)=$1173. This is the maximum amount of credit that can be claimed this year. Any excess foreign tax credit can either be carried back to a previous year or carried forward for 10 years to offset any past or future foreign tax credit paid on foreign income. So if you had a $5000 credit, $1173 will be credited this year while $3827 will be a carryback or carryforward, or both.

TurboTax does not have calculation worksheets to demonstrate how the credit is calculated, but it does use the formula I described above in the Smart Worksheet to determine the credit.

[rwilsond]

Thank you, DaveF1006. But the question, as I understood it, regarded how to calculate "gross income from all Sources", for Line 3e of Form 1116. TurboTax includes a so-called "Smart Worksheet" for line 3e, but it does not show how it is calculated.