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Where to put foreign taxes paid on foreign stock sale transactions.

qwertyui
Level 3

Do I need to manually input the gain on sale on Form 1116 coded as passive?

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3 Comments 3
itonewbie
Level 15

Yes, you do.  The input is on Credits > Foreign Tax Credit (1116) > Foreign Tax Credit (1116) and under the section for Other Foreign Source Income.

You should also take note that PTO does not compute adjustments of any kind as required such as ODL, SSL, OFL, and capital gain tax rate differential.  If any of these is required, you will need to calculate it manually and enter that on F.1116.

If you have any expenses that are not ratably allocable, you will also need to enter those direct expenses on your own as PTO would have no way of knowing otherwise.

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itonewbie
Level 15

Some foreign stocks, such as mutual funds, are classified as PFIC for US tax purposes.  There are serious tax consequences if the appropriate tax treatment is not determined early or applied correctly and there is a separate set of reporting requirements.

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itonewbie
Level 15

My presumption is that your client is a tax resident in a foreign country.  If your client is a US resident, the gain is still US-sourced even though the company may be incorporated and listed in a foreign country.

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