michael-zhang
Level 2
12-16-2019
12:34 PM
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One of our client is US shareholder of a CFC. We help him to file the GILTI tax. He paid tax to foreign government and elected sec 962, so he could get a GILTI deemed paid tax credit. We report the credit on Schedule 5 as "IRC 1341" credit, and now we received letter from IRS... Do anyone know where we should report the credit?
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itonewbie
Level 15
12-16-2019
12:34 PM
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The IRS is probably questioning the validity of the claim of right credit. Shouldn't the deemed paid foreign tax credit flow through Schedule 3, Part I?
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michael-zhang
Level 2
12-16-2019
12:34 PM
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Yes, the IRS is proposing to disallow the amount claimed on Line 74 of Form 1040 as IRC 1341 Claim of Right Credit. I think you are right, it should flow through nonrefundable credit, schedule 3, but I'm not sure which line of schedule 3... I don't think the deemed paid tax credit is the normal foreign tax credit... I don't know where I could enter that number in schedule 3...
itonewbie
Level 15
12-16-2019
12:34 PM
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Use Line 6 instead of Line 1 and use Box (c). Otherwise, the IRS will be looking for that number from F.1116.
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