Foreign Tax Credit (Form 1116, AMT, Simplied Method)

[savetacks4me]

I've long invested in an international fund, which normally reports a small amount of foreign tax, which is far below the $600 threshold on my joint (MFJ) return. So each year I was transparently getting a foreign tax credit.

1. Mid-2022, that fund was internally converted to a different fund, which was realized by a sale of the original fund and new purchase. As a result, the foreign tax rose to $728, above the threshold. I was then confronted with a brand new world; a confusing Form 1116 and AMT mess, including questions about whether I wanted to elect a Simplified Method, an election I was "warned" was permanent. I went to the TTax Community forum, where I found discussions that, though not real clear, seemed to suggest I should elect the Simplified Method. I'd like to see a clear explanation about what is happening here and what I should do (though I realize this is a complicated arena).
2. In any case, I followed both branches (Simplified and not) via the TTax Interview process and ended up with identical results on my forms. However, at the end of each process, I was told "Your foreign tax credit is $728." in the penultimate step, then "It turns out you don't qualify for this credit" in the final step. Yet when I look at my forms, Schedule 3, Line 1 shows a Foreign Tax Credit of $728, which then also appears on 1040, Line 20. So I remain confused. What did I not qualify for?
   

[DashonnonH]

Hello, If you were required pay foreign tax and you have paid the foreign tax, you would qualify for the credit. There are some types of foreign taxes that do not qualify for the foreign tax credit.  You can view the list here if needed. 

https://www.irs.gov/individuals/international-taxpayers/foreign-taxes-that-qualify-for-the-foreign-t... 

If you see the credit flowing on your return properly, we know the credit is there for you. However, if Turbo tax online also shows you did not qualify for a credit and you are not sure what the software is referring to, I suggest to use the "live help" to take a look at the info. They would be able to explain what's happening as they can get a look at info within the return with you. 

[savetacks4me]

I paid foreign taxes, as a shareholder of a regulated investment company (RIC). I used the interview process in the desktop version of TurboTax 2022 and tried both branches: (1) electing the Simplified Method and (2) not electing it. The second option took longer, but went smoothly, though I must admit I was never sure exactly what was happening along either branch. The final results on both branches seem to be identical, in that I received the same credit and same income tax in each, though there may be some different forms or worksheets in the two branches.

Thus, I have two potential tax returns that has all issues resolved and is blessed for submission. Which return should I file? It seems like filing the version that chose not to elect the simplified Method leaves me unencumbered (or, at least, less encumbered) in future filings, while choosing the one with the Simplified Method imposes more future restrictions. Is that the case? Are there other considerations?

This may all be rather academic, since I do not anticipate a complicated foreign tax situation in the future.