Form 8689, both lines 16 & 35 are negative and line 39 is zero. What number to enter on line 40?

[rws38]

As a US citizen residing in Virginia, I'm required to complete Form 8689 for my US Virgin Islands condo rental net income.  What value should I report on Form 8689, line 41 & 42? And, if line 42 is a refund, does the refund come from USVI authorities, OR refund from my 1040 US tax filing? 

Here are the entries:

> Net income loss on line 11 is ($8,116) after expenses.

> Line 29 is also ($8,116).

> Line 30 is +$21.

> Line 31 is +$5,185.

> Line 32 is ($5,164)

> Line 33 (from 1040, line 8b) is ($14,007).

> Line 34 calcs to 0.579; (math: line 29 divided by line 33)

> Line 35 calcs to ($2,990); math: line 32 multiplied by line 34

> Line 39 is zero.

[JulieS]

I must say, this is a puzzling form when you read through the directions. 

Line 41 and 42 should be -2990, but that doesn't mean you are getting a refund. A negative refund would be a tax due, but that is also not right.

The directions for the form should say at some point that the amount you enter should not be less than $0, but they don't.

The purpose of this form is to see if you owe the USVI any income tax (you don't) and to take a credit for the taxes that you paid to the USVI (you didn't pay any income tax to USVI). 

So this form should be filed, but it doesn't change your tax or refund. 

[rws38]

Very helpful.

So, with respect to Form 8689, line 40, this figure also gets reported to Form 1040, line 19.  Should Form 1040, line 19 reflect -2990 OR zero on the dotted line?

[JulieS · Accepted solution]

It should be $0, because you did not pay anything to USVI. If you enter the negative number it will increase your tax due to the US.