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Link Form 1116 to other activities

You can link Form 1116 with other activities and income to make certain calculations automatically.
Use the
Foreign activity form & unit#
 field on the
1116
 screen to link other activities and income to Form 1116. This automatically calculates gross income from the following:
  • Sources in the country
  • Expenses related to the income
  • Gross foreign source income for the activities
The Form 1116 Foreign Tax Credit worksheet reports these calculations. Submit the worksheet with the return.
Use the
Form 2555 allocation code
 field in the activity's input screen to distribute income between U.S. and foreign-earned income. Income calculated as foreign-earned income during the assignment calculates the Form 2555 exclusion.
Foreign-income earned, minus any allowed exclusion, is reported on Form 1116 as eligible for the foreign tax credit. The Form 2555 Allocation Worksheet reports the distribution between U.S. and foreign-earned income. If you enter a form and unit number for an activity that doesn't contain a code in its
Form 2555 allocation code
 field, amounts don't calculate on Form 1116.
The following Form 1116 amounts calculate automatically when foreign activities are linked to activities with a Form 2555 allocation code:
  • Gross income from sources within the country:
    The calculated amount doesn't include any earned income excluded on Form 2555. Skip the
    Foreign gross income
     field to use the calculated amount instead. If the tax return includes foreign source capital gains or losses, enter them in the
    1116
     screen.
  • Definitely related expenses:
    This is the net reported foreign earned income excluded on Form 2555. To use the calculated amount, skip the
    Definitely related expenses
     field.
  • Gross foreign source income:
    This amount includes any foreign earned income excluded on Form 2555. It doesn't take deductions into account.
  • Reduction in foreign taxes:
     Taxes paid or accrued are reduced by the taxes distributed to foreign-earned income excluded on Form 2555. The system multiplies the taxes by a reduction ratio to distribute a portion of the foreign taxes to the excluded income. The numerator is the foreign earned income excluded for the tax year minus deductions distributed to the excluded income. The denominator is foreign earned income, minus deductible expenses allocated to that income. This amount is reported on Page 2, Part III of the form.
You can enter information to override the calculated amounts.

This article applies to:

  • Product: UltraTax CS
  • Return type: 1040 Individual
  • Subject: Credits
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