Foreign Tax Credit Compliance Tips

Kevin E. Packman is a Partner in our Miami office

Foreign Sourced Qualified Dividends and Gains

If you have received foreign sourced qualified dividends and/or capital gains (including long-term capital gains, unrecaptured section 1250 gain, and/or section 1231 gains) that are taxed in the U.S. at a reduced tax rate, you must adjust the foreign source income that you report on Form 1116, line 1a.

How do I make the adjustment?

• Form 1116 Instructions - See the detailed instructions for "Foreign Qualified Dividends and Capital Gains (Losses)".
• Generally, if the foreign sourced income was taxed at the 0% rate, then you must exclude the income from your foreign source income (Form 1116 line 1a).