Form 1116: Please confirm which calculation is correct and why.

[johnsantaclara1]

Form 1116: Please confirm which calculation is correct.

Dear experts,
I am trying to switch to TT from my tax consultant. I am stuck on form 1116 for my Vanguard VTIAX which he seems to have calculated completely differently than TT though both came up with same foreign tax paid amount.

Please advise which one is correct:

1. Gross Foreign Source Income: Line 2d in form 1116

Tax consultant:

Dividend income =Total ordinary dividends[Box 1a=13304.15]-Qualified Dividends[Box 1b=10744.15] = $2,560
Gross Foreign source income = $2,560+ Qualified Dividends[Box 1b=10744.15] + Total capital gain distr [Box 2a=$69] = 13373.15

Question 1) He entered the above 13373.15 for 2d in form 1116 for "Gross Foreign Source Income" -- is this correct?

TurboTax:

Form 1116: For 2d "Gross Foreign Source Income", I input the amount specified in Foreign income under "Foreign Tax Paid" form from Vanguard as is.

Is entering as above inTurboTax correct or is my tax consultant correct?

2. Gross income from sources within country shown above : Line 1a in form 1116

Tax consultant: Chose "Other" as the country

He got the amount for "Foreign Source Qualified Dividend Adjustment”=5089 from somewhere which is not in my tax forms - not sure how. He then did Qualified Dividends[Box 1b=10744.15]-5089 = 5655.15
He came up with another number for “Capital Gain Distribution Adjustment”=32 from somewhere which is not in my tax forms - not sure how. He then did Total capital gain distr [Box 2a==$69]- 32= $37
He then entered 1a= Gross income from foreign sources [Dividend income=2560] + $5655.15+$37=$5692.15

Turbotax:

I chose RIC as the country and TT did it’s own computation which is very different in numbers though line 33 in form 1116 has same number for both.

[johnsantaclara1]

Dear experts,
I am trying to switch to TT from my tax consultant. I am stuck on form 1116 for my Vanguard VTIAX which he seems to have calculated completely differently than TT though both came up with same foreign tax paid amount.

Please advise which one is correct:

1. Gross Foreign Source Income: Line 2d in form 1116

Tax consultant:

Dividend income =Total ordinary dividends[Box 1a=13304.15]-Qualified Dividends[Box 1b=10744.15] = $2,560
Gross Foreign source income = $2,560+ Qualified Dividends[Box 1b=10744.15] + Total capital gain distr [Box 2a=$69] = 13373.15

Question 1) He entered the above 13373.15 for 2d in form 1116 for "Gross Foreign Source Income" -- is this correct?

TurboTax:

Form 1116: For 2d "Gross Foreign Source Income", I input the amount specified in Foreign income under "Foreign Tax Paid" form from Vanguard as is.

Is entering as above inTurboTax correct or is my tax consultant correct?

2. Gross income from sources within country shown above : Line 1a in form 1116

Tax consultant: Chose "Other" as the country

He got the amount for "Foreign Source Qualified Dividend Adjustment”=5089 from somewhere which is not in my tax forms - not sure how. He then did Qualified Dividends[Box 1b=10744.15]-5089 = 5655.15
He came up with another number for “Capital Gain Distribution Adjustment”=32 from somewhere which is not in my tax forms - not sure how. He then did Total capital gain distr [Box 2a==$69]- 32= $37
He then entered 1a= Gross income from foreign sources [Dividend income=2560] + $5655.15+$37=$5692.15

Turbotax:

I chose RIC as the country and TT did it’s own computation which is very different in numbers though line 33 in form 1116 has same number for both.

[SusanY1]

The tax credit is determined based on ratios that include the amount of total income and foreign income as well as the foreign tax paid. 

The credit is intended to compute the amount of equivalent U.S. tax on the same income.  If the income isn't properly classified (as dividends or capital gains) it may not compute properly.  

The foreign tax paid amount likely comes from your 1099-DIV, and it sounds like you have properly accounted for the foreign income based on what is on your forms.   If you don't see the numbers that your consultant entered on any of your income documents, I can't imagine where those numbers came from either.   Only the consultant is likely to know. 

However, rest assured that as long as you are entering the data that you have from your forms directly into the TurboTax interview, we guarantee the accuracy of the tax calculation.  

RIC or other are fine in this situation, neither will affect the calculation of the credit.