Is US depreciation an expense in form 1116?

shsamardar · Post by **shsamardar** » Mon Mar 23, 2015 7:35 pm

Hi

1-
in US foreign tax credit form, there is line for expenses DEFINITELY related to the income. Income source is rental, passive category.

In Schedule E, we have depreciation of the property.

Is the depreciation an expense DEFINTELY related to the income ?

2- This year, on the rental, I have positive net but I am offsetting it with my previous year losses, therefore in form 1040, line 17, Rental real state , it is showing 0

Am I eligible for any foreign tax credit or everything has to be carried forward to next year?

Sincerely,

shsamardar · Post by **shsamardar** » Wed Mar 25, 2015 11:44 am

I appreciate any reply from Forum regarding above questions.

shsamardar · Post by **shsamardar** » Wed Apr 01, 2015 10:28 am

Would you please help with this posting?

In 1116 form, how do we address "Deductible rental real estate loss" entered on Schedule E?

If prior year causes to offset this year rental profit in Schedule E, how this will be address on 1116 form for tax paid to canada?

nelsona · Post by **nelsona** » Wed Apr 01, 2015 10:58 am

On 1116 you are not reporting gross rental income, you are reporting NET rental income (line 17 of 1040), which is part of your Gross income.

This is often a confusion when one sees the term gross on 1116.

Simply report the net profit from schedule E related to your Cdn rental, and go from there. None of the espenses on scedule E should appear on 1116, since they were accounted for there. 1116 will include itemized deductions and other expenses from 1040.

if you have no profit this year, and are paying no US tax, you canot take any credit. However, you should list any Cdn tax paid or accrued, and it will be carried forwsrd to future years.

You should also consider making sure that you use CCA in canada so that you are not having profit in canada and no profit in US.

nelsona · Post by **nelsona** » Wed Apr 01, 2015 10:59 am

Remember though that this forum is voluntary, pleading for answers after you ahve posted is not considerate.

Your posts are read, and we volunterer answers.

DaveM · Post by **DaveM** » Wed Apr 01, 2015 9:08 pm

On that subject, just wanted to thank you Nelsona for having stayed on a little longer than you had apparently planned this season. People get really desperate as Apr15 nears and your help is (as always) invaluable.

nelsona · Post by **nelsona** » Thu Apr 02, 2015 8:55 am

It is that despaeration that makes me leave.

shsamardar · Post by **shsamardar** » Thu Apr 02, 2015 1:28 pm

Nelson, Thank you very much for your educating and help for this forum.
You speak from experience.

Regarding your response for Gross income versus Net income for 1116,

What could be the reason that IRS form and its instruction is referring to word GROSS all over the place without any mentioning to NET at all?

The 1116 form has section for deductions and losses, If the Gross income meant NET income, what is the reason behind section to cover deductions and losses again in the 1116 form?

Regards,

nelsona · Post by **nelsona** » Thu Apr 02, 2015 1:39 pm

Please, I answered that.

Look at line 37 of 1040. What is it called: Adjusted GROSS INCOME. What goes into GROSS income? line 12, which is net (not gross) business income, line 13, which is net (not gross) capital gains, line 15a and 15b which are taxable (not gross) pension ammounts.

The deductions that are being discussed are the ones from lines 23-36, and from schedule A.

This issue is closed until may, please.