Foreign tax paid on zero interest

[kathyc2]

Client has a 1099INT from brokerage account that show ~400 of foreign tax paid.  Interest income and all other lines on form are blank. I don't know how you could pay foreign tax on zero interest income? If I look in the detail pages it shows it is for Curacao and references Pimco All Asset Fund.

Can this be correct?

 

[JRS]

From what I know, this fund pays dividends on the investment.  Just guessing, I would say it should have shown on the 1099-div.  Like I said, just guessing.

[kathyc2]

There is also a 1099DIV.  Total foreign dividends from the statement are less than $200.  The DIV also shows a small amount of foreign tax. 

The point of foreign tax credit is so the same income is not taxed at full rate for US tax.

Since there is no US interest income for this account, I think I should just not show the foreign tax on return???

[Gail in Virginia]

Could this possible be foreign taxes accrued the previous year and being paid this year?  Or taxes accrued this year which will be paid next year? 

[TexTaxToo]

Perhaps it has to do with when the income was recognized and when the tax accrued.

Form 1116 will limit the credit to the proportional amount of US tax on the foreign-sourced income.  If there is no foreign-source income and/or the credit is limited, they can carry over the unused credit to another year.  (But the cost of preparing the forms may be excessive for these small amounts.)

If this is an MFJ return and the total tax paid is less than $600, the limitations don't apply, so go ahead and claim it without using Form 1116.

[jklcpa]

1 hour ago, TexTaxToo said:

the limitations don't apply

I'm not saying that this isn't true in the OP's case, but for other readers in future, this isn't always entirely true and is dependent on what else is on the return, where the taxes were paid, and if the tax is creditable or not.  While the 1040 instructions do give this as general criteria of when the 1116 may be bypassed, if one reads the instructions to form 1116, it is an election to not include the 1116, and one must still consider whether the general limitations apply, whether a tax is actually creditable or not, and must still figure any amounts that would be shown on line 12.

I'm sure that there are returns that should include the form 1116 that don't and are never caught by the IRS. 

[kathyc2]

FYI I contacted the broker this morning, and they are issuing corrected forms.