Should RSUs granted in Israel in 2016 and 2017 prior to relocating to the US, which were sold in 2019, be reported as foreign tax credit and also regular income?

[Lembo]

Upon vesting shares were sold in Israel to cover US tax, and upon final sale Israeli income and capital gain taxes were deducted from the proceeds.
Shadow account was connected and according to 1099-b gain was added to income in the income section.
In addition I added the total Israeli sale as income separating into 2, income and capital gain and added the paid tax for foreign tax credit.
Are the dual reporting correct?

[DavidS127]

More information may help resolve your issue.  For example: when did the shares vest; is this Israel-source income; if a U.S. resident for income tax purposes when was that U.S. residency effective; where were you living when the shares vested; and where were you living when the shares were were sold?

One distinction that is important is earned income (e.g., that is reported as wages, as the vested RSUs would have been) versus the capital gain from the sale of the RSUs (the difference between the sales proceeds and the cost basis, which would equate to what was included in earned income).

Note that if you are a U.S. citizen or resident alien, the rules for filing income tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside.

But, if you had income from foreign sources and were either a bona fide resident of a foreign country or were physically present there for most of the year, you probably qualify to exclude some or all of your foreign earned income from taxation by the U.S.  Even if you don't meet those tests for foreign earned income exclusion, you get a credit for foreign taxes paid on our income.

See the IRS website at this link for more information, and other links to the foreign income exclusi...

[Lembo]

I received the RSUs in 2016 and 2017 while living and working in Israel (no US status).

Those that vested in 2016/2017 were sold in 2017 prior to moving to the US.

Those that vested during 2018 and 2019 were sold in 2019 while some sales happened in 2018 to cover US tax upon vesting (and were reported in 2018).

As of 2018 I am a US resident for tax purposes and live in the US.

so from what I understood, 1099-B reported the gain vest to sale and added that in the income section.

In the foreign tax credit section I added earned income and capital gain as 2 lines and the combined tax paid.