Form 1116: How to enter the income under "resourced by treaty" category?

[Mary67]

Hi. A tax-tip posted in this site (https://turbotax.intuit.com/tax-tips/military/filing-irs-form-1116-to-claim-the-foreign-tax-credit/L...   listed as updated for the 2019 tax year) mentions  that TT supports as income category on 1116 the "resourced by treaty" one. Unfortunately, I was unable to find this category, although the post is updated for 2019 return. 

My income is passive (pensions and social security benefits) and is sourced in US. According to the treaty I am using and according to the IRS instructions for 1116, entering the income as resourced to the country of residence is the correct way of getting the tax credits I am seeking. 

Please advise if TT online deluxe supports this action and how to proceed.

Thank you. 

[jtax]

I see it in the desktop version. After the foreign taxes interview asks if there is any other income besides 1099/K1s. If I say yes I get this screen:

[jtax]

This is also a very complex area. I'm not sure what you're suggesting is right, but I don't for sure. You should probably seek the advice of a CPA, enrolled agent, or tax attorney with a lot of foreign tax experience.

See the 1116 instructions, which seems to say re-sourced income on 1116 doesn't apply if you are a US citizen living in the foreign country. Perhaps it isn't US income or is removed somewhere else. I don't know.  https://www.irs.gov/pub/irs-pdf/i1116.pdf page 5:

f. Certain Income Re-Sourced by Treaty

If a sourcing rule in an applicable
income tax treaty treats U.S. source
income as foreign source, and you elect
to apply the treaty, the income will be
treated as foreign source.
Important. You must compute a
separate foreign tax credit limitation for
any income for which you claim benefits
under a treaty, using a separate Form
1116 for each amount of re-sourced
income from a treaty country. This rule
does not apply to income that is
re-sourced by reason of the relief from
double taxation rules in any U.S. income
tax treaty that is solely applicable to
U.S. citizens who are residents of the
foreign treaty country. See sections
865(h), 904(d)(6), and 904(h)(10) and
the regulations under those sections
(including 1.904-4(k)) for any grouping
rules and other exceptions. Add the
amounts from line 22 of each separate
Form 1116 and enter the total on line 28
of your summary Form 1116 (that is, the
Form 1116 for which you are completing
Part IV). In addition, you may be
required to file Form 8833,
Treaty-Based Return Position
Disclosure Under Section 6114 or
7701(b), for the re-sourced income.

[Mary67]

Thank you very much for your effort. 

From the text in bold, I understand that only the rule of computing separate tax credit limitations per income category is not needed in the case of the income re-sourced by reason of relief from double taxation.

Indeed, the tax treaty between US and Switzerland (SW) (https://www.irs.gov/businesses/international-businesses/switzerland-tax-treaty-documents)  in ART 23, paragraph 2 mentions that US shall allow to US citizens as a credit against the US tax on income the appropriate amount of tax paid in SW. …  entered as " income taxes" on US returns. 

The publication Technical Explanation Of The Convention Between The United States Of America
And The Swiss Confederation further details how this should be dealt with:

"Since the income described in paragraph 3 is U.S. source income, special rules are required to resource some of the income to Switzerland in order for the United States to be able to credit the Swiss tax. This
resourcing is provided for in subparagraph 3(c), which deems the items of income referred to in
subparagraph 3(a) to be from Swiss sources to the extent necessary to avoid double taxation under
paragraph 3(b). The rules of paragraph 3(c) apply only for purposes of determining U.S. foreign
tax credits with respect to taxes referred to in paragraphs 2(a) and 3 of Article 2 (Taxes Covered)."

Your advice for contacting an expert familiar with tax treaties is duly noted. It is a pity that, for special cases,  TurboTax does not offer the possibility to connect directly to an expert familiar with not so common tax code aspects. Waste of time on both sides. 

Thank you again.

[Mary67]

Thank you. I finally found the screen in another line of questions than the one I was looking into. 

[jtax]

@Mary67 thank you for following up with the detail from the Swiss treaty and expressly stating that one didn't need to separate income that a treaty does re-source if US taxation is based on citizenship (rather than residency or something else). That made something click for me. Very helpful.

RE: TT connecting with specialists. That would be nice, but I don't think it can happen. Why? Because TT is probably going full gas just to keep up with changes and make everything work. Lots of details. They have to focus on the common cases, not the rare ones. I actually am very impressed that the software handles so many uncommon cases and usually does so well. (This is only my opinion. This is a volunteer forum and I don't work for Intuit.