Publication 514 |
2000 Tax Year |
How To Claim the Credit
You must file Form 1116 to claim the foreign tax credit unless you
meet one of the following exceptions.
Exceptions.
If you choose to be exempt from the foreign tax credit limit (see
Exemption from foreign tax limit earlier under How To
Figure the Credit), do not file Form 1116. Instead, enter your
foreign taxes directly on line 43 of Form 1040.
If you are a shareholder of a controlled foreign corporation and
chose to be taxed at corporate rates on the amount you must include in
gross income from that corporation, use Form 1118 to claim the credit.
See Controlled foreign corporation shareholder, under
You Must Have Paid or Accrued the Tax, earlier.
Form 1116
You must file a Form 1116 with your U.S. income tax return, Form
1040. You must file a separate Form 1116 for each of the following
categories of income for which you claim a foreign tax credit.
- Passive income.
- High withholding tax interest.
- Financial services income.
- Shipping income.
- Dividends from a DISC or former DISC.
- Certain distributions from an FSC or former FSC.
- Lump-sum distributions.
- Section 901(j) income.
- Income re-sourced by treaty.
- General limitation income--all other income from
sources outside the United States.
A Form 1116 consists of four parts as explained next.
- Part I--Taxable Income or Loss From Sources
Outside the United States (for Category Checked Above). Enter
the gross amounts of your foreign or possession source income in the
separate limit category for which you are completing the form. From
these, subtract the deductions that are definitely related to the
separate limit income, and a ratable share of the deductions not
definitely related to that income. If, in a separate limit category,
you received income from more than one foreign country or U.S.
possession, complete a separate column for each.
- Part II--Foreign Taxes Paid or Accrued. This
part shows the foreign taxes you paid or accrued on the income in the
separate limit category in foreign currency and U.S. dollars. If you
paid (or accrued) foreign tax to more than one foreign country or U.S.
possession, complete a separate line for each.
- Part III--Figuring the Credit. You use this
part to figure the foreign tax credit that is allowable.
- Part IV--Summary of Credits From Separate Parts
III. You use this part on one Form 1116 to summarize the foreign
tax credits figured on separate Forms 1116.
Records To Keep
You should keep the following records in case you are later asked
to verify the taxes shown on your Form 1116 or Form 1040. You do not
have to attach these records to your Form 1040.
- A receipt for each foreign tax payment.
- The foreign tax return if you claim a credit for taxes
accrued.
- Any payee statement (such as Form 1099-DIV or Form
1099-INT) showing foreign taxes reported to you.
The receipt or return you keep as proof should be either the
original, a duplicate original, a duly certified or authenticated
copy, or a sworn copy. If the receipt or return is in a foreign
language, you also should have a certified translation of it. Revenue
Ruling 67-308 in Cumulative Bulletin 1967-2 discusses in
detail the requirements of the certified translation. You can buy the
Cumulative Bulletin from the Government Printing Office.
Copies of the Cumulative Bulletins are also available in
most IRS offices and you are welcome to read them there.
Alternative Minimum Tax
In addition to your regular income tax, you may be liable for the
alternative minimum tax. A foreign tax credit may be allowed in
figuring this tax. See the instructions for Form 6251,
Alternative Minimum Tax--Individuals, for a discussion
of the alternative minimum tax foreign tax credit.
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