F1116 error on line 3e

[Martam]

Hi,

I have an error on F1116 Foreign Income,its says line 3e should be greater that foreign income on line1.

I do this every year for my clients,however, this year she shows only social security ( 2,500) and foreign income benefits. No other income she has and that is why the line 3e is less than foreign income.

I don't know what will be the best solution to it. Try few things nothing works. i cant efile her taxes.

She wants her F1116 with her F 1040.

Please help

Marta

[itonewbie]

Not conceivable how that is possible.  Could you please provide some numbers?

What exactly is foreign income benefits?

Need more info especially since treaty provisions often come into play.

[Martam]

Hi,

Yes is real.I ma doing foreign incomes last 8 years & did not have such as case.

Foreign amount is for foreign pension, passive income. Client have only soc.sec benefits and that foreign pension.,no other income. No treaty apply. Small amounts foreign pension is 7,000 and soc sec is 2,500.Therefore on the F1116 L3e says is too small to foreign income line 1.I can not modify it either:(

The client have carry over amounts from previous years so I don't want to loose those either.

Appreciate any advise.

[itonewbie]

You are still not giving us the crucial details...

If all your client had was $9,500 of income, there wouldn't be a filing requirement to start with.

Assuming all $9,500 is in G/L, which is unusual for pension, even if your client had other income, there is no reason why Line 3e, which is gross income from all sources, could be smaller than Line 1a, which is gross income from within the foreign country.  By design and mathematically, gross income from all source just has to be larger than (or equal to, assuming the taxpayer has US-source income,) that of foreign countries.

My only guess is that you had overriden or adjusted the line for all sources. Suggest that you check your input under Credits > Foreign Tax Credit (1116).  On the input screen, click on the link for Gen. Info/Elections in the top-right corner, and see if you have any input on the line for Gross income from all sources [Adjust].

If not, please come back with more specific info about your client's income, the baskets these fall under, and the amounts you entered vs what you see on the return.

[Martam]

Hi,

Thank you very much for all information. This is problematic issue i have to solved this in another way.

I found that the problem is that the client is filing MFS, of course there is no requirements to file the taxes, but the client wants to file anyway. The foreign pension is NOT taxable income, so her lets say taxable SSA is her only income on the F1040. At this point the problem is within the Proseries I believe. No value were override by me. And the line 3e which should show gross income is showing only 50% of the client SSA benefits. I should be able to adjust it correctly, however, Proseries does not allowed me to do it, except override it.

I have to find the other solution to be able to efile, otherways I have to prepare paper return & mail it.

Thank you very much:)

Marta

[itonewbie]

I can understand why some would prefer to file even though there's no filing requirement.  But filing a F.1116 would be a different matter, unless, of course, there is no additional fee for that (which would be unusual).

Are you sure the foreign pension is not taxable, especially since you said there's no treaty?  Does that pension account consist only of cost basis with no earnings (and had previously already been subject to US tax in full, which again is unusual)?  Have you considered whether that account would constitute foreign grantor trust (which is subject to onerous reporting with substantial penalties for failure to comply) and the PFIC implications?

I read from your previous post that the social security is foreign benefits.  If that is the case and, as you said, there's no treaty, §86 shouldn't apply.