We have found an error in the Foreign Tax credit calculations (2023)

[cfbastian]

We are using the Desktop Premier version for Macintosh.

To calculate Foreign tax credits we have entered foreign source income and qualified deductions (worksheet line 1h). The program then calculates a qualified dividends adjustment (line 1k) and a net qualified dividends figure (line 1l).

The IRS instructions for Form 1116 say to use 0.5405 as the qualified dividends adjustment (https://www.irs.gov/pub/irs-pdf/i1116.pdf Page 10). However, the program is apparently using 0.5136. 

[rogge1722]

From TT's on-demand guidance:

Form 1116 (COPY 1) -- Foreign Tax Credit Comp Wks : Adjusted QDI income

Line 1l, columns A, B and C:

If the Foreign Qualified Dividends and/or Capital Gains Adjustment Smart Worksheet checkbox is not checked, from Line 1f.

Otherwise, from Line 1g, plus the result of one of the following calculations, depending on whether the Schedule D Tax Worksheet or the Qualified Dividends and Capital Gain Tax Worksheet is used:

If Schedule D Tax Worksheet is used.
- Line 1j multiplied by the Sch D Tax Worksheet, line 40, divided by the Sch D Tax Worksheet, line 11a. The result is multiplied by 0.7568.
PLUS
- Line 1j multiplied by the Sch D Tax Worksheet, line 11a minus line 40, divided by the Sch D Tax Worksheet, line 11a.
PLUS
- Line 1i multiplied by the Sch D Tax Worksheet, line 37, divided by the Sch D Tax Worksheet, line 11b. The result is multiplied by 0.6757.
PLUS
- Line 1i multiplied by the Sch D Tax Worksheet, line 11b minus line 37, divided by the Sch D Tax Worksheet, line 11b.
PLUS
- Line 1h minus line 1i minus line 1j, with the result multiplied by the following ratio:
-- Sch D Tax Worksheet, line 31, multiplied by 0.5405, plus
-- Sch D Tax Worksheet, line 28, multiplied by 0.4054.
-- The sum of the above two lines is divided by the sum of Sch D Tax Worksheet, lines 20, 28, and 31. The result is the ratio to be used. If the sum of lines 20, 28, and 31 is 0, the ratio is defined as 1.
NOTE: With the exception of the last line for how to calculate the ratio, the result of any calculation which has a 0 as a denominator is defined as 0.

If Qualified Dividends and Capital Gain Tax Worksheet is used.
- Line 1h multiplied by the following ratio:
-- Qualified Dividend/Capital Gain Wksht, line 20, multiplied by 0.5405, plus
-- Qualified Dividend/Capital Gain Wksht, line 17, multiplied by 0.4054.
-- The sum of the above two lines is divided by the sum of the Qualified Dividend/Capital Gain Wksht, lines 9, 17, and 20. The result is the ratio to be used. If the sum of lines 9, 17, and 20 is 0, the ratio is defined as 1.

NOTE: Calculated result may be adjusted by up to $2 to allow columns A, B, and C to add up to the Total column after accounting for rounding.