Question

Form 1116 Line 1a and 3d entries.For Long term Capital gains(passive) which figure to be entered.?

Forum|Forum|2 years ago
August 31, 2023
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Form 1116 Line 1a and 3d entries.
For  property Long term Capital gains(passive) which figure to be entered.?
Is it Gross means total value with out deducting costs for the cost of purchase or after deducting all costs? One CPA says in Q&A session it is  gross(with out deducting costs) to be entered.
Form 1116 line 3d instructions  says 'For lines 3d and 3e, gross income means the total of your gross receipts (reduced by cost of goods sold), total capital and ordinary ‘GAINS’(before subtracting any losses).
Per above, I think For LTCG net gain from (schedule Column h ) to be entered? Which one to be?
Thanks.

TurboTax Online

A

Anonymous_

Employee

@pk12_2 ?

R

RaytamAuthor

I mean Capital gain, from Schedule D,line h

P

pk12_2

Employee

@Raytam having gone through your post describing the situation, my understanding in the situation/scenario is as follows :

(a) you a US Person ( citizen/GreenCard / Resident for Tax purposes

(b) you owned capital asset -- probably real-estate -- in another country

(c) you disposed of the asset during the tax year ( 2022 ?) and are showing a net profit on Schedule-D

(d) the foreign country / tax authority is now taxed you on the disposal of the asset ( which country? )

(e) you have chosen to take foreign tax credit and therefore filing a form 1116.

If this is correct --

1. for purposes of form 1116 , Schedule-D is not germane -- ignore the figures there for the time being

2. for form 1116, it needs to know what was your foreign income which the foreign tax was imposed; what was the foreign taxes paid ( if there is a refund on this you will then have to file an amended US return for that ).

3. line 1(a) -- this should be your gross income from the disposition -- generally the price of the property

disposed LESS basis i.e. the expenses to acquire the asset. ( note that this should be based on the local laws -- some countries allow depreciation , some allow indexing etc. etc. )

4. line 2 should be all expenses related to the selling/ disposal of the asset --- this amount should be under the law of the land

5. line 7 should therefore be equivalent to your net income from foreign sources for these disposals.

6. Note that all these are expressed in US $ of the day of the activity.

Please see the instructions for form 1116

Does this help ? Is there more I can do for you ?

pk