Form 1116 Foreign Tax Credits for Individuals: Mastering Calculations, Using Carryovers and Maximizing Benefits

Recording of a 110-minute CPE webinar with Q&A


Conducted on Wednesday, August 17, 2016

Recorded event now available

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Program Materials

This webinar will provide tax advisers with a comprehensive guide to calculating foreign tax credits and completing Form 1116. The panel will outline which foreign taxes are eligible for Section 901 foreign income tax credits, discuss strategies for determining optimal treatment of creditable foreign taxes, describe the elections available for taxpayers with foreign income and taxes, and offer practical guidance regarding completing Form 1116, including examples.

Description

U.S. taxpayers are entitled under Section 901 to claim foreign tax credits for certain foreign income taxes, whether actually paid or deemed paid. However, the foreign tax credit rules are complex, the carryback and carryover periods are limited, and the availability of the credits is limited by both the category or “basket” of income and by the ratio of foreign-source income to worldwide income.

The credit is limited to the taxpayer’s pre-credit U.S. income tax liability multiplied by the ratio of the taxpayer’s foreign-source taxable income to its worldwide taxable income. This limitation is applied to two “baskets” of income: passive category income and general category income. Tax advisers must therefore understand the basketing rules to accurately calculate available credits and carryovers.

The foreign tax credit carryback and carryover rules also present issues and planning opportunities. For example, if a taxpayer has a credit carryover but does not anticipate having sufficient low-taxed foreign-source income in future years to utilize the carryover, the excess foreign tax credits will be lost absent proactive planning.

Listen as our experienced panel provides a comprehensive guide to calculating foreign tax credits, completing Form 1116. The panel will outline which foreign taxes are eligible for Section 901 foreign income tax credits, discuss strategies for determining optimal treatment of creditable foreign taxes, describe the elections available for taxpayers with foreign income and taxes, and offer practical guidance regarding completing Form 1116, including examples.

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Outline

  1. Section 901 Creditable Foreign Taxes
  2. “Deemed paid” foreign taxes under Section 902
  3. Sourcing rules and grouping of income into “baskets”
  4. Income limitations
  5. Documentation and substantiation requirements and challenges
  6. Calculating credits and carry-overs
  7. Strategies for maximizing credit benefits

Benefits

The panel will discuss these and other important aspects of foreign tax credit calculations:

  • Identifying creditable foreign taxes
  • Section 902 “deemed paid” foreign income taxes
  • Calculating credit carryovers
  • Strategies for using up foreign tax credit carryovers
  • “Basket” groupings and foreign sourcing rules

Faculty

Skinner, William
William R. Skinner

Partner
Fenwick & West

Mr. Skinner focuses his practice on U.S. international taxation, with a particular emphasis on tax planning and...  |  Read More

Kevin M. Hall
Kevin M. Hall

Holland & Knight

Mr. Hall practices in the areas of domestic and international taxation. He has experience providing tax advice to...  |  Read More

Neel Modha
Neel Modha
Holthouse Carlin & Van Trigt

Mr. Modha's practice focuses on international tax, specializing in international tax consulting and compliance...  |  Read More

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