New (tax) year, new help!

Fixed Assets and UltraTax CS 2023 help is now on Help and Support. We're still moving articles, but you can find most content for the 2023 tax year there. Continue using the Help & How-To Center for tax years 2022 and older.

Use the Foreign activity form & unit# field on the 1116 screen to link other activities and income to Form 1116. This will automatically calculate gross income from sources within the country, expenses definitely related to the income, and gross foreign source income for the activities whose form / schedule and unit number are entered. The Form 1116 Foreign Tax Credit worksheet reports these calculations and is designed to be submitted with the return.

Use the Form 2555 allocation code field in the applicable activity's input screen to allocate income between U.S. and foreign earned income. Income calculated as foreign earned during the assignment calculates the Form 2555 exclusion.

Foreign income earned before, during, and after the foreign assignment, less any applicable exclusion, reports on Form 1116 as eligible for the foreign tax credit. The Form 2555 Allocation Worksheet reports the allocation between U.S. and foreign earned income. If you enter a form and unit number for an activity that does not contain a code in its respective Form 2555 allocation code field, no amounts calculate on Form 1116.

The following Form 1116 amounts calculate automatically when foreign activities are properly linked to activities with a Form 2555 allocation code.

• Gross income from sources within the country: The calculated amount does not include any earned income excluded on Form 2555. Skip the Foreign gross income field to use the calculated amount instead. If the tax return includes foreign source capital gains or losses, enter those gains or losses in the fields provided in Screen 1116. Please refer to Form 1116 instructions for additional information.
• Definitely related expenses: This amount is reported net of the amount attributable to any foreign earned income excluded on Form 2555. To use the calculated amount, skip the Definitely related expenses field.
• Gross foreign source income: This amount is calculated without regard to deductions and includes any foreign earned income excluded on Form 2555.
• Reduction in foreign taxes: Taxes paid or accrued are reduced by the taxes allocable to foreign earned income excluded on Form 2555. A portion of the foreign taxes are allocated to the excluded income by multiplying the taxes by a reduction ratio. The numerator is the foreign earned income excluded for the tax year less deductions allocated to the excluded income. The denominator is foreign earned income received during the tax year less deductible expenses allocated to that income. This amount is reported on Page 2, Part III of the form, and the calculation details are reported on a required statement.

To override (force) the calculated amounts, enter the desired amounts in the applicable fields.

Was this article helpful?

Yes No

Submit