I do not have 1099-B form for foreign capital gains. I reported it as such. Turbotax is asking to upload copy of the form. What should I do?

[jvembuna]

I tried that already but didn't help. The screen only provides option with a US brokerage firm where I could enter foreign tax credit for an international index fund. Nothing else is possible for entering India tax credit.

[DaveF1006]

You still need to report this as a foreign tax credit. Here are the steps.

1. Open (continue) your return in TurboTax
2. Go to federal>deductions and credits>estimate and other taxes paid
3. Foreign taxes >start
4. When you reach the screen Do You Want the Deduction or the Credit? select the option you prefer for your situation
5. If you select Take a Credit:
   • Continue through the screens until it asks for income type. Here select passive income.
   • When you reach the screen Country Summary, select Add a Country. Add india
   • Other Gross income enter the gross proceeds from the equity fund
   • Don't enter the expenses as this may negatively impact your Foreign Tax paid.
   • Foreign losses. You may wish to leave this blank.
   • Foreign taxes paid. Select the option that mentions foreign taxes paid on rent, royalty or other income
   • Be sure to indicate the date these were paid
   • Answer the questions about your foreign income, taxes, and expenses on the following screens
   • When finished, you'll be taken back to the Country Summary screen. If you have income from other countries to enter, select Add a Country. Otherwise, select Done

 Continue through this section until you reach the end.  Make sure you enter any carryovers that may have occurred in a previous year. 

@jvembuna 

[glance56]

Since this conversation is in the context of Foreign Capital Gains from the sale of foreign stocks, where there is no 1099-B, but the 1099-B information is manually input in TurboTax and then we come to Foreign Tax Credit section - can you please clarify what is meant by "Other Gross income enter the gross proceeds from the equity fund" from your response?

For example, let us assume I had bought foreign stocks worth $50,000 a couple years ago, and sold those for $60,000, resulting in long term capital gains of $10,000, all in foreign currency. 

In the workflow for Form 1116, when I come to the "Other Gross Income - Country X" screen, what should I put in the "Amount for Country X" field?  Should I input $60,000 (which is the proceeds from the sale of the foreign stocks), or should I input $10,000 (since that's my gain)?

[RobertB4444]

It depends on how Country X taxed you.  Put the amount of gross income taxed by Country X in that box.

@glance56 

[glance56]

Can you explain what that dependency is when you say "It depends on how Country X taxed you."?

Also, can you explain in the context of the example I used in the question?  While I appreciate you responding, simply restating the field name without explaining what is meant by "gross income" is not helpful.  I would expect a helpful answer to provide a definitive dollar amount value for that field, using values from my example in the question.  If you need further clarification on the question, please feel free to ask specific clarifying question(s).

[DaveF1006]

Gross income is all income received in the form of money, property, and services that isn't exempt from tax. It's the total income received before allowable deductions. For a business, gross income is the total receipts minus the cost of goods sold.

Does this clarify your question? Reach out if you have additional questions.

@glance56 

[glance56]

Unfortunately, it does not answer my question.  I am not looking for a generic definition of gross income. My question is specifically in the context of Foreign Tax Credit.

If it helps, below is my original question, with example values.  I'd like a response value in the context of that example:

Since this conversation is in the context of Foreign Capital Gains from the sale of foreign stocks, where there is no 1099-B, but the 1099-B information is manually input in TurboTax and then we come to Foreign Tax Credit section - can you please clarify what is meant by "Other Gross income enter the gross proceeds from the equity fund" from your response?

For example, let us assume I had bought foreign stocks worth $50,000 a couple years ago, and sold those for $60,000, resulting in long term capital gains of $10,000, all in foreign currency.

In the workflow for Form 1116, when I come to the "Other Gross Income - Country X" screen, what should I put in the "Amount for Country X" field? Should I input $60,000 (which is the proceeds from the sale of the foreign stocks), or should I input $10,000 (since that's my gain)?

[AmyC]

From Form 1116, Foreign Tax Credit  Instructions on page 9,- worksheets are used to determine the answer. Please see page 10, Schedule D filers to complete the correct worksheet for your situation. 

The page 10 instructions include: Adjustments to foreign capital gains and losses. You must use Worksheet A, Worksheet B, or the instructions under Capital Gains and Losses in Pub. 514 to determine the adjustments you must make to your foreign capital gains or losses. Read the instructions that follow to see if you qualify to use Worksheet A or Worksheet B. If you don't qualify to use Worksheet A or Worksheet B, use the instructions under Capital Gains and Losses in Pub. 514 to determine the adjustments you must make.

@glance56

[girigiri]

Hi:

I have paid Indian taxes on capital gains on sale of a stock and a bond and in the "Investment Income" section of Turbo Tax when I enter the information related to the stock sale (Ex: Proceeds, date of sale, cost...etc.,) It does not ask for input regarding Foreign taxes paid on the proceeds.

Where should I enter the same?. 

Regards,

[Mike9241]

You have difficulty because Turbotax put the entries for this type of FTC under deductions and credits >estimates and other taxes. once you get to this section select start/update for Foreign Taxes.   Note that Turbotax says that you must enter foreign taxes reported on dividends, interest and K-1 before starting this section. read each page. you'll come to a page that asks you to select a method for computing the FTC for alternative minimum tax purposes. if you choose a method in the past, you must continue to use it. if not you get to select either the simplified or other method. Can't say which is best for you. For ease of entry, I chose the simplified method.

more screens until you get to one that asks for the category which is passive - just like dividends and interest

more screens - read them and answer the questions

another screen asks for description and amount - enter foreign capital gains and the amount of the gain - note amounts must be converted to US $

https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates 

more screens read what they ask and answer as applicable

finally, a page that asks about foreign taxes paid to India

select the question that starts with No

enter the FTC paid as converted into US $ on the line for other income 

enter the date paid in 2023

done

based on the tax rate in India vs your effective US rate you may not get full credit for the taxes paid to India

you should review the 1116 but that can't be done until you pay your fees.  Finish the return first before paying and reviewing.  

[girigiri]

In the instruction, Schedule D refers only to Estates and trusts. (Form 1041) and not for individuals.

Schedule D Filers

Note. Throughout these instructions, references to Schedule D (Form 1041) are for estates and trusts only.

https://www.irs.gov/instructions/i1116#en_US_2023_publink11441fd0e1815

Looks like all these complex instructions and loops are designed with ulterior motive to trap people  who have paid Foreign taxes on income from their homeland and are living in US and subject them to double taxation. The word "Foreign Tax Credit" labeled in Form 1116 looks like a sweet carrot for foreign nationals who are residents or living in US, but the reality is it may be a bitter one. 

I spent many hours to figure this  so called "Foreign Tax Credit" but due to the gymnastics of the process and how many tax software including TT have made it very complex to go through the process with totally inadequate instructions to claim the same (may be by design!!), I am thinking of just paying the taxes in both US and in my country for the same income. 

[glance56]

Based on my experience, TurboTax is not suited for handling the foreign taxes paid situation.  The laws and the software do not make it easy at all for users, and I am not confident it is doing it correctly either.  I would recommend having a CPA do your taxes for your scenario. Yes, it will cost money, but in the end you should not pay double taxes for the same income in two countries.  Again, based on my experience, a CPA got me better results even after paying him vs. TurboTax.

[girigiri]

Hi Mike9241:

• Looks like for FTC, dividends should be only "Qualified Dividends" and not ordinary dividends and taxes paid only on qualified dividends qualify for FTC!!!
• Again, for Annuity income, looks like there is no place to add Foreign taxes paid in Turbo Tax. (I may be overlooking something)
• At least for interest income there is a place to enter "Foreign tax paid"

Let me know your thoughts.