New Form 1116 Foreign Tax Credits for Individuals: New Income Baskets, New Calculation Rules

GILTI, Section 78 "Gross Ups," Repeal of Deemed Paid Foreign Tax, New Limitations and Calculation Rules

Note: CLE credit is not offered on this program

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


Conducted on Tuesday, June 25, 2019

Recorded event now available

or call 1-800-926-7926
Program Materials

This webinar will provide a practical guide to completing Form 1116 to claim foreign tax credits (FTCs) in the aftermath of recent IRS guidance interpreting the 2017 tax reform law changes to the Section 901 credit regime. The panel will outline which foreign taxes are eligible for foreign income tax credits after GILTI, discuss strategies for determining the optimal treatment of creditable foreign taxes, and describe the elections available for taxpayers with foreign income and taxes.

Description

The 2017 tax reform law made significant and far-reaching changes to taxpayers' ability to claim FTCs under Section 901. The creation of several new "basket" classifications of foreign-based income has led to several changes and heightened complexity in the calculations and reporting required to claim the FTC on Form 1116.

U.S. taxpayers are entitled under Section 901 to claim FTCs for certain foreign income taxes, whether paid or deemed paid. However, the foreign tax credit rules are involved, 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 IRS issued a set of proposed regulations outlining the impact of the 2017 tax reform law on FTCs. Among the fundamental changes are new FTC limitations under Section 904(d), additional income baskets, with a corresponding expansion of Part IV of Form 1116, and the much-discussed GILTI inclusion. The law also repealed Sec. 902, which provided a deemed paid credit for taxes paid by a foreign corporation.

Listen as our expert panel provides a comprehensive guide to calculating FTCs in completing Form 1116. The panel will outline which foreign taxes are eligible for Section 901 FTC and discuss the changes to Form 1116 resulting from the 2017 tax reform law.

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Outline

  1. Section 901 creditable foreign taxes
  2. Sourcing rules and grouping of income into "baskets"
  3. Income limitations
  4. Documentation and substantiation requirements and challenges
  5. Calculating credits and carryovers
  6. Changes to 2018 Form 1116

Benefits

The panel will discuss these and other important aspects of FTC calculations:

  • Identifying creditable foreign taxes
  • "Basket" groupings, foreign sourcing rules and new income baskets
  • Impact of GILTI on tax calculations
  • Other key changes from the 2017 tax reform law reflected in Form 1116
  • Interest and other expense allocation
  • Strategies for using up foreign tax credit carryovers

Faculty

Dougherty, Alison
Alison N. Dougherty, J.D., LL.M.
Director, Tax Services
Aronson

Ms. Dougherty specializes in U.S. international tax reporting, compliance, consulting, planning, and structuring as a...  |  Read More

Samtoy, John
John Samtoy

Tax Principal
Holthouse Carlin & Van Trigt

Mr. Samtoy’s practice specializes in international tax compliance and consulting services, with a focus on...  |  Read More

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