Form 1116 Foreign Tax Credit Line 3E "Gross income from all sources" is greater than my total (gross) income on 1040 line 9. How is this larger number on 1116 calculated?

[NJoshi]

I'm not able to find the source of line 3e gross income on Form 1116.

[Mike9241]

gross income means the total of your gross receipts (reduced by cost of goods sold), total capital and ordinary gains (before subtracting any losses), and all other income (before subtracting any deductions).
so no specific lines will total to this

[NJoshi]

My question was about line 3e "Gross income from all sources" on Form 1116 which is a form for calculating Foreign Tax Credit. Your answer seems to be about business tax return forms such as 1065 and 1120S since you are talking about cost of goods sold etc.

I am not able to see how turbo tax calculated line 3e on Form 1116.

[Critter-3]

In the PRINT CENTER save a PDF of the return with the worksheets to see that line's information ... and here is the instructions for that form : 

https://www.irs.gov/instructions/i1116

Line 3e.

Enter on line 3e in each column your gross income from all sources and all categories, both U.S. and foreign. Include any foreign earned income you have excluded on Form 2555 but don't include any other exempt income.

If you are a nonresident alien, include on both lines 3d and 3e your income that isn't effectively connected with a trade or business in the United States.

If you had to adjust your foreign qualified dividends or capital gains (discussed earlier), include those amounts without regard to any adjustments.

[Mike9241]

did you read the instructions for the calculation of gross income?

from 1116 instructions

For lines 3d and 3e, gross income
means the total of your gross receipts
(reduced by cost of goods sold), total
capital and ordinary gains (before
subtracting any losses), and all other
income (before subtracting any
deductions).

[NJoshi]

Mike9241 and Critter 3 - thanks for your responses.

I had already read form 1116 instructions including the instruction for line 3e. 

However I am not able to understand how the amount on Form 1116 line 3e can be greater than the  amount on Form 1040 line 9 which is total income. This total income includes foreign source income - foreign capital gain as well as foreign bank account interest. The  foreign capital gain included on 1040/line 9 is before any adjustments are applied to it on 1116/line 1a. Line 1a on form 1116 is a reduced number after applying the adjustments, however, the foreign source capital gain included in 1040/line 9 is the full amount before any reductions. I don't have any losses, so the amounts are not reduced by any losses either.

Since Form 1040 line 9 is Total Income, it is the total income amount before any deductions are applied such as standard deduction.

How did Turbotax calculate 1116/line 3e to be greater than 1040/line 9?

[NJoshi · Accepted solution]

I found the answer to my question from another TT community forum thread. I am pasting it here - 

Form 1116 (COPY 1) : Line 3ea
Calculated Gross income from all sources:

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.

[turbokarst]

Message has "Schedule F, line 11 (all copies) plus"

Seems like an error and should be Schedule F LINE 9... not schedule F line 11.  Line 11 is a farm chemical expense and not income.  Hope this isn't in the code as a lot of errors would be generated.

[64dancer]

If you have a loss on 1040 Line 7, that would be why the TT number is higher. They do not consider Capital Gain Losses. You need to look at Schedule D and include all of the gains. I have a loss on Line 1a, but gains on lines 2, 8a, and 13. Add up just the gains. My 1040 line 7 is a $(3000) loss due to my large carryover loss on Schedule D on line 6.

My problem is I have taken this into account and TT still has a higher Gross Income on Form 1116, 3e. I am off $2428 and have no idea why. It doesn't change the bottom line of Form 1116, but the detail is incorrect. 

Any help with this would be appreciated.

[DaveF1006]

This is difficult to ascertain without viewing you tax return to view all income sources. I would suggest for you to contact Turbo Tax live support so they view your screen to determine how that amount is determined.

@64dancer

[UserP001]

There is an answer which helped me from another thread.

Answer: The narative definition of Form 1116 line 3ea is provided by Turbo Tax as shown by rogge1722.  I carefully followed the definition adding each reference amount and had never been able to arrive at the same number Turbo Tax determined.  The TT number was always much higher than my calculation.

I finally realized that I was interpreting the Schedule D instruction literally.  I had a significant number of trades and the numbers appearing on Schedule D were net gain/loss figures.  To get the correct value you have to go through each trade and add only the gains ignoring the losses.  In my case that added a significant value to 3ea and I finally had a number that quite closely agreed with TT.

This drove me crazy for quite some time and I hope this explanation helps others.

With that persons advice I found the issue.

Thread: "How does Turbotax automatically calculate Gross Income from all sources on the Form 1116 3e? There is error in automatic calculation. My Mac does not open data source."

Link: https://ttlc.intuit.com/community/taxes/discussion/how-does-turbotax-automatically-calcu[product key...

[RoBeau]

Form 1116 line 3e, Can I enter Roth IRA distribution as part of the gross income from all sources? 
In other words, Roth IRA is not report on form 1040. Can I include it in form 1116 line 3e anyway? 
To me Roth IRA distribution is part of the gross income..