Case Study 1: FTC Without Form 1116

Ryan, who is single, received Form 1099-DIV that shows $29 of foreign taxes paid. According to Ryan, he received no other foreign source of income and paid no other foreign taxes. The dividends were paid on shares of a mutual fund that he owned all year. He is eligible to claim the $29 foreign tax credit on Form 1040, Schedule 3 and does not have to file Form 1116.

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Taxpayers can elect to report foreign tax without filing Form 1116 as long as the following conditions are met:

All of the gross foreign source income was from interest and dividends and all of that income and the foreign tax paid on it were reported on Form 1099-INT, Form 1099-DIV, or Schedule K-1 (or substitute statement)
If the taxpayer had dividend income from shares of stock, those shares were held for at least 16 days
Taxpayer is not filing Form 4563 or excluding income from sources within Puerto Rico
The total of the foreign taxes was not more than $300 (not more than $600 if married filing jointly).
All of the foreign taxes were:
- Legally owed and not eligible for a refund, and
- Paid to countries that are recognized by the United States and do not support terrorism

Foreign Tax Credit Workout

Election To Claim Foreign Tax Credit Without Filing Form 1116

Case Study 1: FTC Without Form 1116