Turbotax does not process form 1116 High tax kickout corrrectly

[jingle123]

I'm trying to reclassify a passive foreign income to general income due to high tax kickout. However, I keep hitting issues even with the desktop Turbotax.

On the first graph below (Passive income category copy 1), I reported the foreign rental income 62,707 before deduction and expenses on line 1a under passive income category. Then I reported the expenses line 2, and line 6 is 55,499. This foreign tax on this income is high taxed, so I reported a negative number on line 13 for HTKO.

On the second graph (Passive income category copy 2), I reported the income and expenses as negative numbers again under passive income category. But the software doesn't handle it correctly with the negative deduction, it came up with a small positive number on line 6 (should be -55,499). I tried to override it, but the software returns error.

On the third graph (General income category copy 1), I reported the income and expense as positve numbers under General category. I put a positive number on line 13. Again, the number on line 6 is wrong and it doesn't like my manual override.

How do I report HTKO properly with turbotax desktop? I already gave up the online version since it actually has more errors for HTKO reporting. Would appreaciate if someone can give me a step by step guide.

[rogge1722]

A simplified hypothetical user using the following data is utilized in the screenshots for this demo HTKO. Ordinary dividends 200K, qualified dividends 50K, foreign tax paid 1500, and foreign source income 5000. All the data was entered into the f1116 worksheet for each category of income. Some of the data TT completed automatically. The one part that required modification was the foreign tax paid in the general category In Part 2 was $1.00 in order for TT to print page 2 of f1116.

[jingle123]

Thanks for your reply. I tried to put the related income and HTKO on the same form, but the software doesn't allow me to continue this step. Click "Continue" doesn't work. It only works if I delete the "HTKO" entry.

[rogge1722]

I entered a value for qualified dividends in the f1116 worksheet and it worked. Because of the way HTKO is structured, I would avoid using the interview and use the worksheet only.

[jingle123]

I entered a value here and also in the worksheet, it still doesn't allow me to go to the next question.

Also how can you make the expenses definitely related to gross income work for HKTO? It doesn't apply the amount on f1116 correctly (see screenshot below, I put in $1,000 expenses).

[rogge1722]

Using the Demo, on the worksheet for copy 1, under the 2b codes, enter a positive amount for Column A and below the same amount as a negative amount for Column B. They will be the same but opposite on line 6.

[jingle123]

It doesn't process line 4 mortgage interest correctly even after I manually override the value to be negative

[rogge1722]

From TT's Unsupported Calculations:

If there is passive category income that is treated as general category income because it is high taxed (HTKO), you must read the IRS Form 1116 instructions for line i and lines 2-5 and 13 on how to enter this income and the related foreign tax. Amounts automatically calculated on these lines must be overridden.

The demo is limited to using the standard deduction.