Foreign Tax & IRA

[Bill Tubbs]

Client's mutual fund had paid Foreign Tax on his behalf. If this mutual fund was in a non-retirement account, he could generally tax the Foreign Tax Credit (1040, pg 2) for the amount of Foreign Tax paid.

But, what about when the mutual fund is in an IRA, either Traditional or Roth? I figure since the earnings n the Roth is taxfree, that the Foreign Tax paid would not be eligible for the credit. But, with a Traditional IRA, the earning in the account will be taxable when it's withdrawn, so is the Foreign Tax paid eligible for the Credit?

Thanks,
Bill

[BOB W]

Client's mutual fund had paid Foreign Tax on his behalf. If this mutual fund was in a non-retirement account, he could generally tax the Foreign Tax Credit (1040, pg 2) for the amount of Foreign Tax paid.

But, what about when the mutual fund is in an IRA, either Traditional or Roth? I figure since the earnings n the Roth is taxfree, that the Foreign Tax paid would not be eligible for the credit. But, with a Traditional IRA, the earning in the account will be taxable when it's withdrawn, so is the Foreign Tax paid eligible for the Credit?

Thanks,
Bill

I believe any special attributes gets lost in any kind of IRA. It is like owning tax fee bonds in an IRA, it has no effect on the outcome of the IRA> not that someone should do such a crazy thing. Tax deferred income going in = fully taxed income coming out, including all of the sources that caused the growth.

[ChEAr$]

Yep!

remember it like this: what happens in Las Vegas (an IRA) stays in ..........