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February 20, 2025
Question

Have passive income from India including LTCG on sale of shares of say $60000. Can I take them all in line 1a of 1116 without any adjustment.

  • February 20, 2025
  • 2 replies
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My total income is about $76000 including LTCG from India plus interest of 3000 in US bank CD. Can I enter 76000 in Line 1a of F1116 and compute the FTC without making any adjustments. I have no such thing as qualified dividend or capital gain distribution. Entire LTCG is from sale of shares in India.

    2 replies

    DaveF1006
    February 20, 2025

    Yes, there is an adjustment that needs to be made.  the IRS states that an adjustment needs to be made on Line 1A on the Form 1116 if:

     

    1. You have foreign qualifying dividends or long-term capital gains totaling more than $20,000, OR
    2. Your total income exceeds certain thresholds based on your filing status. The thresholds are:
    • $383,900 if married filing jointly or qualifying surviving spouse,
    • $191,950 if married filing separately,
    • $191,950 if single, or
    • $191,950 if head of household.

    Since your long term capital gains is more than $20, 000, you will need to adjust this amount. Please use the table I have included below to determine your adjustment based on the percentages given in the table..

     

    Instructions for Form 1116

     

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    Employee
    February 20, 2025

    @ramanathan1720 , Namashkaram. 

    Assuming you are a US person.  using  windows  download of the product ( only because I am not familiar with the screens of the on-line product ), are you trying to enter the details in the forms mode or what ?   if so, unless you are adept at  TurboTax and understand the  workings of the form 1116 ( and its purpose of  "mitigating double taxation"), I would strongly suggest using the  step-by-step method.  But yes , when you are done, do go back to forms mode and check that  at least the  form 1116  tax worksheet ( the enterable one )  looks correct.

    Generally 1a is where you are entering the gross foreign income from each of the countries involved, while 3e shows  your world income from all sources including the foreign income ( i.e. your world income ).

     

    About adjustments -- generally these are  mostly treaty based  adjustments  and /or costs against the  income stream.  For sale of shares , only thing I can think of are the commissions / fees that you may have paid  ( these are related to the sale ) .  The TDS  ( Taxes  Deducted at Source ), while unsettled  yet,  ( for the  Indian tax year 2024/2025), can be used a Foreign Taxes  paid.    Note that if the final figure is different  from the TDS figure then you may have to file an amended return to recognize this.

     

    Hope you are aware that the foreign tax  is recognized dollar for dollar, the  amount allowable for the tax year is the lesser of amount actually paid   and  US tax on the same doubly taxed income  ( this is what form 1116 does.).   

     

    Is there more I can do for you ?