@Fred_Fandango I don't know what to say other than
(a) TurboTax Foreign Tax Credit form 1116 worksheet pretty much follows the instructions for form 1116 published by the IRS.
(b) The frustration that users feel in trying to find items/figures that TurboTax asks for are really from the instructions themselves. The root cause , IMHO , are statutes themselves are really not taxpayer friendly. And not to the advantage of the common taxpayer.
(c) The statutes themselves section 901 through 906 and specifically section 904, begrudgingly provides and limits the credit to ONLY a maximum of what US would have taxed the same income. This credit is ONLY applicable for countries with whom US has tax treaties in effect and with double taxation clause in effect..
(d) another complication is that it tries to allow adjustment for cases where the treaty also calls for a tax rate of no more than xx%, thus needing adjustment of the gross foreign income.
(e) On your particular issue of " adjusted basis" of foreign assets ( or foreign source income ), :
1. For most assets ( when you are selling ) basis does not need adjustment. However, if the tax treaty calls for a fixed rate of taxation then adjustment is the way to achieve this effect. IRS instructions call this adjustment factor. TubroTax just applies this based on your entry.
2. For Mutual fund dividends / interest etc. , generally there is no need for adjustments , except for cases ( very few ) where the treat calls for fixed rate of taxation.
3. Note that most Mutual funds call out the foreign taxes paid ( your share of the taxes ) but do not directly tell you your share of the foreign source income -- you have to get this from the broker or from the back pages of the consolidated broker report -- what percentage of income was from foreign source country. It is complicated.
Thus while I sympathize with you about the complexities of filling out the form 1116 / worksheet for form 1116, I cannot subscribe to the contention the software is " broken " for this particular issue and only on windows version of the product ( I am not familiar with the screens & questions for the on-line product ) . I also agree that some of the wording on the windows product could have been better designed to reduce confusion.
That is my personal view.
Is there more I can do for you?
