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Need Help with Form 1116 (Foreign Tax Credit)

I am a US citizen with foreign income and assets. I have a bit of a complex situation and need help with my 2018 Form 1116 (Foreign Tax Credit)

 

First, I have multiple sources of income, but they are all passive, as follows:

- Rental Income from Israel 

- Capital Gains/Losses on real estate sold. 

- Small amount of Foreign income/tax paid on Dividends from brokerage accounts. 

 

So, my first question:  Since all the above is Passive Income, can I simply add it all up and provide a single form 1116? (more specifically, should Capital gain/loss from the sales of the property be included on Form 1116?

 

Second, the questions on form 1116 include various question about value of assets and income from all sources  (see below):  These questions are used to calculate the allocation ratios. 

My question: are these questions referring to my foreign income and expense or all my income and expenses? Where can I find guidance on how to answer these questions?

 

The line items on the form are:

(1) Deductible Home Mortgage Expense

(2) Total foreign income of type indicated above

(3) Gross income from all sources

 

(b) Adjusted Basis of Investment Assets Generating Foreign Income

(c) Adjusted Basis of total investment assets. 

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Expert Alumni

Need Help with Form 1116 (Foreign Tax Credit)

First, yes, you can complete just one Form 1116 since all of the income is the same category of income (passive). 

 

For the more specific questions you will answer them as follows:

 

1 - Deductible Home Mortgage Interest if you itemize your deductions and include mortgage interest, then you include it all here.  If you use the standard deduction, do not include any of it here.  

 

2- Total foreign income of type indicated above - this is all of your foreign passive income.

 

3-  Gross income from all sources -  all income, foreign and domestic, wages and passive income.  

 

(b) Adjusted Basis of Investment Assets Generating Foreign Income this is the adjusted basis of the your foreign assets that have generated the passive income.  (may be the same as your total basis).

 

(c) Adjusted Basis of total investment assets the basis of all of your investments, foreign and domestic (such as all of your investments in your brokerage account). 

 

 

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Highlighted
Expert Alumni

Need Help with Form 1116 (Foreign Tax Credit)

First, yes, you can complete just one Form 1116 since all of the income is the same category of income (passive). 

 

For the more specific questions you will answer them as follows:

 

1 - Deductible Home Mortgage Interest if you itemize your deductions and include mortgage interest, then you include it all here.  If you use the standard deduction, do not include any of it here.  

 

2- Total foreign income of type indicated above - this is all of your foreign passive income.

 

3-  Gross income from all sources -  all income, foreign and domestic, wages and passive income.  

 

(b) Adjusted Basis of Investment Assets Generating Foreign Income this is the adjusted basis of the your foreign assets that have generated the passive income.  (may be the same as your total basis).

 

(c) Adjusted Basis of total investment assets the basis of all of your investments, foreign and domestic (such as all of your investments in your brokerage account). 

 

 

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

View solution in original post

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