1041-US: Foreign taxes paid as a deduction or credit (FAQ)

Alerts and notices

Question

If the estate or trust paid foreign taxes, can the estate or trust take the amount as a deduction or claim the amount as a credit?

Answer

Yes. Do one of the following to take the foreign tax as a deduction or to claim the tax as a credit.

  • To take the foreign tax as a deduction, either leave Screen 1116 blank and enter the tax in the Taxes, not entered elsewhere field on Screen Deduct in the Deductions folder, or enter the information on Screen 1116 in the K1 1065 & 1120S folder, K1 1041 folder, or Credits folder and enter X in the Report all foreign tax as a deduction checkbox on Screen OthCr in the Credits folder.
  • If opting to take a foreign tax credit and the type of foreign income is interest and/or dividends, you can enter the tax information at the same time that you enter the income information in the statement dialogs for the Interest income and Dividends fields on Screen Income in the Income folder.

    Notes

    • UltraTax CS automatically marks the X if Foreign field when an amount is entered the Foreign Amount or Foreign Tax Paid fields. You may also mark this field if the amount entered in the Interest Amount field is foreign, but there is no foreign tax paid. When this field is marked, the amount is considered to be foreign and is transferred to Form 1116 and included in the calculation of the foreign tax credit.
    • The foreign columns in statement dialogs do not display unless there is foreign data present. To access the foreign columns while in the statement dialog, choose Columns > Foreign Columns or click the Show foreign columns (globe) Show/hide foreign columns button on the toolbar.

The foreign income and tax information entered in these statement dialogs transfers automatically to Screen 1116. Do not enter this information again on Screen 1116. If the type of foreign income is not interest and/or dividends or you choose not to use the statement dialogs on Screen Income, enter the required information on Screen 1116 in the Credits folder.

If the type of foreign income is from a pass-through activity, enter the information on Screen 1116 in the K1 1065 & 1120S or K1 1041 folder.

Related topic: 1041-US: Form 1116 FAQs