What does "gross income sourced at beneficiary level" mean when TT is asking for details about foreign income reported in box 14 of a trust k-1?

Forum|Forum|6 years ago
June 1, 2019
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I am using a 2018 Premier Turbotax CD for a Mac. A trust k-1 reported foreign income (and tax payments) distributed to me with respect to dividends payed to the trust by the ADR of a foreign corporation and by mutual funds that owned foreign companies.

I don't understand the term "sourced at beneficiary level" in that context. All of it was sourced at the trust and then distributed to the beneficiaries.

Does it want all to know about all income disbursed to me on the k-1, and then a breakdown of US versus Foreign income?

TurboTax Premier Mac

jtax

Employee

The wording is confusing. I believe the exact wording on the k-1 worksheet (not the interview) is "sourced or allocated at the beneficiary level" or at "trust level."

What is going on is that some trust income (and deductions/credits for foreign taxes) stay with the trust and some go to the beneficiaries depending upon the wording of the trust itself and what was paid in a given year.

Given your facts of trust income actually distributed to you, it would all be "sourced" or "allocated" to the beneficiary.

For the foreign tax credit, what TT needs is the amount of foreign tax paid from your income (e.g. trust distributions to you) AND the amount of trust income allocated/distributed to you from US sources and from foreign sources. Then it can calculate how much of a credit you can tax.

TT needs to compute the ratio for your total (not just trust but all income) from foreign sources compared to US sources. Why? Because your credit is limited to the smaller of

(foreign income / worldwide income ) * US tax

and foreign tax paid.

This effectively means you can rarely use your whole credit unless you have a high ratio of foreign income (not likely for US residents with minor overseas investments).

Also note that for small amounts (<$600 I think) of foreign tax paid credit from mutual funds there is a simplified reporting/calculation.

Does that help? If not please ask for more clarification.

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Anonymous

TurboTax for K-1 Box 14 has three lines: "Gross Income Sourced at Beneficiary level", "Gross Income Sourced at Beneficiary level: U.S. Source", and "Gross Income Sourced at Beneficiary level: Foreign Source". My K-1 under foreign tax credit has "country", "gross income, " "qualified dividends," "taxes." My K-1 main page (Part III) has "Ordinary Dividends" and "Qualified Dividends", nothing before and nothing after until Box 14.

I have no idea how to map the document I've got with the form TurboTax is showing me.