Trying to understand how to input foreign dividend information for TT to complete form 1116. Specifically, what should I enter when TT asks me to input "Foreign Dividends Received" for a mutual fund?
Here's why it is a question:
I have investments with two mutual funds, call them Mutual Fund
A & B, that each hold a mix of domestic and foreign stocks. From each I received domestic and foreign dividends,
and each paid foreign taxes.
Mutual Fund A gives me the total dividend and tells me how to calculate the foreign source dividend AND the qualified source foreign dividend. It also tells me to create an adjusted foreign source dividend using a formula that uses the foreign source dividend, the qualified foreign source dividend, and takes into account my Qualified Dividend Tax Rate based on my ordinary income. Mutual Fund A says to enter the resulting adjusted foreign dividend into form 1116, Line 1a. This is the amount that I entered when TT asked for the "Foreign Dividends Received" for Mutual Fund A.
Mutual Fund B reports actual dollar numbers (no calculations needed) for the foreign source dividend and the qualified foreign source dividend. They instruct me to use this formula: (Foreign dividend - qualified foreign dividend) plus (qualified foreign dividend times EITHER .4054 or .5405). I choose either.4054 or .5405 depending on my Qualified Dividend Tax Rate. Mutual Fund B then says this calculated number is what I should enter on form 1116, line 1a. This is the amount that I entered when TT asked for the "Foreign Dividends Received" for Mutual Fund B.
Are these correct? Should I enter these calculated numbers when TT asks me to input "Foreign Dividends Received" for a mutual fund? Or should I enter the foreign source dividend, or the qualified foreign source dividend?
During the foreign tax credit interview, a screen will ask for Foreign-Source Income. You type in the foreign "ordinary dividends" which includes both unqualified and qualified foreign dividends and any foreign capital gains in box 2a. Later, a screen will ask for "any foreign source qualified dividends or long term capital gains". Here you enter the foreign qualified dividends and foreign long term capital gains. TT will make all necessary adjustments if necessary. You can ignore the rest of the instructions.