Is a capital gain made on an American mutual fund (such as iShares MSCI Canada Index), focusing on foreign stocks, regarded by IRS as a "foreign source capital gain"? I can find no definition of that term, which is used all over form 1116.
-
-
No One is Responding,
so I'll take a crack at it.
I believe an investment in an American mutual fund is considered domestic for dividends and capital gains. Irrespective of where the mutual fund invests its money.
If there are any quirks in the investment of mutual funds in foreign countries, that would be for the mutual fund company to deal with the regulations on that issue (if there are any). Another technical name for a mutual fund is a "regulated investment company."
Ownership of a foreign stock by a mutual fund does not exempt them from having to pay foreign taxes on profits. That's why the foreign tax credit is "passed through" to the investor.
Not the best source on this, but I believe the foregoing to be correct.
Comment