Form 1116 Line 18: 0.5946 adjustment to Taxable Income

[The Real Halloween]

Form 1116 Line 18: TP completed a Qualified Dividends and Capital Gain Tax Worksheet and did not have any foreign qualified dividends or foreign capital gains (or losses).

TP has to make an adjustment by reducing taxable income carried to f1116 line 18 by 0.5946.

Can you shed some lights how was 0.5946 derived?

Thanks for your input.

[George4Tacks]

Are you referring to the number on line 19? It is Line 17 divided by Line 18.  There is no direct correlation of that to dividends specifically. 

Was there any foreign tax involved with dividends? 

[The Real Halloween]

@George4Tacks I am referring to line 18 of 2019 f1116.  It seems that line 18 is not a straight carry-over taxable income from line 11b of f1040.  There were no foreign qualified dividends and capital gains so there is no exception.

According to page 21 of f1116 instructions, "If you have qualified dividends or capital gains, you may be required to make adjustments to those qualified dividends and gains before you take those
amounts into account on line 18."

The adjustment is by reducing the taxable income from line 11b f1040 by 0.5946 (15% preferential rate) of the qualified dividends and capital gains.  In other words, only 0.4054 of qualified dividends and capital gains flows to line 18 of f1116.

I would like to know whether you can let me know how the IRS got 0.5946? 

Thank you!

[George4Tacks]

I need more information. First - IRS did not get 0.5946. A cooperative effort between you and PTO got that number.

Give me some numbers. Did the foreign tax originate from a 1099-DIV? When you did the input did you put -1 for the amount of foreign dividend, or did you just leave it blank to indicate none? 

The have used many words in the this thread, but you have not given enough information for an outsider to figure it out. Maybe you should just send the return to PTO and let them figure it out for you.

If you ask a volunteer, you have to give the whole story, not just a small sound bite.

[The Real Halloween]

Noted with thanks.