Form 1116

[kary johnaon]

Client has foreign tax credit carryovers. however, in the current year there is no foreign tax income to place in Part I, line 1a of the 1116. As a result, no amounts appear to flow to line 3d. Thus no amount is calculated for line 7 of part I and line 15 of part 15 of part III.
Thus, it appears that even though I have carryover foreign tax credits in this case they are not available to be used.
Is there a way to place an amount from a prior year in line 3d of part I??

[Rapid Robert]

I/m pretty sure you don't get to use up the foreign tax credit carryforward unless you have foreign taxable income in the current year. Just like you can't use most nonrefundable domestic tax credits unless you have a tax liability.

The foreign tax credit is a nonrefundable credit.

[FEDUKE404]

RR is correct.
You cannot get a foreign tax credit. . .unless you have current year foreign tax.
(Tax software should still internally keep track of any unused foreign tax credits from prior years.)

I've been grinding out a Form 1116. Calculations get annoying when you have to reduce the foreign "income" on line 1a due to the presence of QUALIFIED dividends and/or capital gain distributions. The allowable income amount, which is a factor in determining the final foreign tax credit, can shrink a lot!

FE

[Rapid Robert]

"I've been grinding out a Form 1116."

I have lost myself more than once in Form 1116. But lately, I find that if all the foreign dividends/tax are on 1099-DIV forms, and the payers are all RICs (regulated investment companies? = U.S. brokerage firms), the Form 1116 becomes fairly simple. Once I see a single column with "RIC" at the top and the correct amount of credit at the bottom also showing "1099-DIV", I consider it mission accomplished and move on.

If there is a limitation and a carryforward, then it is much more complicated, no doubt.

[FEDUKE404]

"I've been grinding out a Form 1116."

I have lost myself more than once in Form 1116. But lately, I find that if all the foreign dividends/tax are on 1099-DIV forms, and the payers are all RICs (regulated investment companies? = U.S. brokerage firms), the Form 1116 becomes fairly simple. Once I see a single column with "RIC" at the top and the correct amount of credit at the bottom also showing "1099-DIV", I consider it mission accomplished and move on.

If there is a limitation and a carryforward, then it is much more complicated, no doubt.

Your points are noted. But many companies, to include RICs and Canadian stocks, have QUALIFIED dividends and some have LTCG distributions. Either of those can reduce the amount of "foreign income" that is allowed to be entered on line 1a of Part i of Form 1116. That allowable number can be significantly less thamn the actual "foreign income" actually received.

All of the carryover stuff on page two is generally handled pretty well by competent tax software. Thank goodness. . .

FE