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Unemployment compensation - category for foreign tax credit
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David Rosenbaum
May 25, 2012, 11:44:56 AM5/25/12
to
Here's a bit of a weird question. When claiming a foreign tax credit
using Form 1116, income needs to be categorized.
Should unemployment compensation (foreign, obviously) be reported as
passive or as general limitation?
Thanks for any ideas.
David Rosenbaum
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using Form 1116, income needs to be categorized.
Should unemployment compensation (foreign, obviously) be reported as
passive or as general limitation?
Thanks for any ideas.
David Rosenbaum
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2011) - All rights reserved. >>
<< ------------------------------------------------------- >>
Alan
May 25, 2012, 3:23:58 PM5/25/12
to
On 5/25/12 9:44 AM, David Rosenbaum wrote:
> Here's a bit of a weird question. When claiming a foreign tax credit
> using Form 1116, income needs to be categorized.
>
> Should unemployment compensation (foreign, obviously) be reported as
> passive or as general limitation?
>
> Thanks for any ideas.
>
> David Rosenbaum
>
It's not a lump sum distribution using averaging.
> Here's a bit of a weird question. When claiming a foreign tax credit
> using Form 1116, income needs to be categorized.
>
> Should unemployment compensation (foreign, obviously) be reported as
> passive or as general limitation?
>
> Thanks for any ideas.
>
> David Rosenbaum
>
It's not income resourced by treaty.
It's not Sec. 901(j) income.
It's not in the definition for passive income.
Therefore, I must conclude that it is general category income.
--
Alan
http://taxtopics.net
sieme...@gmail.com
May 26, 2012, 2:39:00 PM5/26/12
to
On Friday, May 25, 2012 8:44:56 AM UTC-7, David Rosenbaum wrote:
> Here's a bit of a weird question. When claiming a foreign tax credit
> using Form 1116, income needs to be categorized.
>
> Should unemployment compensation (foreign, obviously) be reported as
> passive or as general limitation?
I think it is general income because it's a division of wages/salary http://www.irs.gov/instructions/i1116/ch01.html#d0e439.
> Here's a bit of a weird question. When claiming a foreign tax credit
> using Form 1116, income needs to be categorized.
>
> Should unemployment compensation (foreign, obviously) be reported as
> passive or as general limitation?
>From IRC 904
BEGIN QUOTE http://www.taxalmanac.org/index.php/Internal_Revenue_Code:Sec._904._Limitation_on_credit
(B) Passive income
(i) In general
Except as otherwise provided in this subparagraph, the term
''passive income'' means any income received or accrued by
any person which is of a kind which would be foreign personal
holding company income (as defined in section 954(c)).
(ii)
END QUOTE
There are also parts (ii) to (v) though I don't think they apply here.
>From IRC 954
BEGIN QUOTE http://www.taxalmanac.org/index.php/Internal_Revenue_Code:Sec._954._Foreign_base_company_income
(c) Foreign personal holding company income
(1) In general
For purposes of subsection (a)(1), the term ''foreign personal
holding company income'' means the portion of the gross income
which consists of:
(A) Dividends, etc.
Dividends, interest, royalties, rents, and annuities.
(B) Certain property transactions ...
(C) Commodities transactions ...
(D) Foreign currency gains ...
(E) Income equivalent to interest ...
(F) Income from notional principal contracts ...
(G) Payments in lieu of dividends ...
(I) Personal service contracts ...
END QUOTE
These statutes are very complicated and have lots of clauses that don't apply to most people, like (B) to (I) above, and one sections refers to another like how 904 refers to 954. Seems Congress has too much time on its hands :).
David Rosenbaum
May 28, 2012, 10:50:23 AM5/28/12
to
On May 25, 10:23 pm, Alan <tempu...@vacationmail.com> wrote:
> On 5/25/12 9:44 AM, David Rosenbaum wrote:> Here's a bit of a weird question. When claiming a foreign tax credit
> > using Form 1116, income needs to be categorized.
>
> > Should unemployment compensation (foreign, obviously) be reported as
> > passive or as general limitation?
>
> > Thanks for any ideas.
>
> > David Rosenbaum
>
> It's not a lump sum distribution using averaging.
> It's not income resourced by treaty.
> It's not Sec. 901(j) income.
> It's not in the definition for passive income.
>
> Therefore, I must conclude that it is general category income.
>
> --
> Alanhttp://taxtopics.net
Thanks.
> On 5/25/12 9:44 AM, David Rosenbaum wrote:> Here's a bit of a weird question. When claiming a foreign tax credit
> > using Form 1116, income needs to be categorized.
>
> > Should unemployment compensation (foreign, obviously) be reported as
> > passive or as general limitation?
>
> > Thanks for any ideas.
>
> > David Rosenbaum
>
> It's not a lump sum distribution using averaging.
> It's not income resourced by treaty.
> It's not Sec. 901(j) income.
> It's not in the definition for passive income.
>
> Therefore, I must conclude that it is general category income.
>
> --
> Alanhttp://taxtopics.net
You're correct that the instructions don't include it in passive. But
the language used was "Passive income generally includes dividends"
etc. Implication is that it could include other things. I haven't
checked the Code.
David
David Rosenbaum
May 28, 2012, 10:51:49 AM5/28/12
to
On May 26, 9:39 pm, siemelna...@gmail.com wrote:
> On Friday, May 25, 2012 8:44:56 AM UTC-7, David Rosenbaum wrote:
> > Here's a bit of a weird question. When claiming a foreign tax credit
> > using Form 1116, income needs to be categorized.
>
> > Should unemployment compensation (foreign, obviously) be reported as
> > passive or as general limitation?
>
> I think it is general income because it's a division of wages/salaryhttp://www.irs.gov/instructions/i1116/ch01.html#d0e439.
> On Friday, May 25, 2012 8:44:56 AM UTC-7, David Rosenbaum wrote:
> > Here's a bit of a weird question. When claiming a foreign tax credit
> > using Form 1116, income needs to be categorized.
>
> > Should unemployment compensation (foreign, obviously) be reported as
> > passive or as general limitation?
>
>
> >From IRC 904
>
> BEGIN QUOTEhttp://www.taxalmanac.org/index.php/Internal_Revenue_Code:Sec._904._L...
>
> (B) Passive income
> (i) In general
> Except as otherwise provided in this subparagraph, the term
> ''passive income'' means any income received or accrued by
> any person which is of a kind which would be foreign personal
> holding company income (as defined in section 954(c)).
>
> (ii)
>
> END QUOTE
>
> There are also parts (ii) to (v) though I don't think they apply here.
>
> >From IRC 954
>
> BEGIN QUOTEhttp://www.taxalmanac.org/index.php/Internal_Revenue_Code:Sec._954._F...
> (B) Passive income
> (i) In general
> Except as otherwise provided in this subparagraph, the term
> ''passive income'' means any income received or accrued by
> any person which is of a kind which would be foreign personal
> holding company income (as defined in section 954(c)).
>
> (ii)
>
> END QUOTE
>
> There are also parts (ii) to (v) though I don't think they apply here.
>
> >From IRC 954
>
>
> (c) Foreign personal holding company income
> (1) In general
> For purposes of subsection (a)(1), the term ''foreign personal
> holding company income'' means the portion of the gross income
> which consists of:
> (A) Dividends, etc.
> Dividends, interest, royalties, rents, and annuities.
> (B) Certain property transactions ...
> (C) Commodities transactions ...
> (D) Foreign currency gains ...
> (E) Income equivalent to interest ...
> (F) Income from notional principal contracts ...
> (G) Payments in lieu of dividends ...
> (I) Personal service contracts ...
>
> END QUOTE
>
> These statutes are very complicated and have lots of clauses that don't apply to most people, like (B) to (I) above, and one sections refers to another like how 904 refers to 954. Seems Congress has too much time on its hands :).
Sounds good.
> (c) Foreign personal holding company income
> (1) In general
> For purposes of subsection (a)(1), the term ''foreign personal
> holding company income'' means the portion of the gross income
> which consists of:
> (A) Dividends, etc.
> Dividends, interest, royalties, rents, and annuities.
> (B) Certain property transactions ...
> (C) Commodities transactions ...
> (D) Foreign currency gains ...
> (E) Income equivalent to interest ...
> (F) Income from notional principal contracts ...
> (G) Payments in lieu of dividends ...
> (I) Personal service contracts ...
>
> END QUOTE
>
> These statutes are very complicated and have lots of clauses that don't apply to most people, like (B) to (I) above, and one sections refers to another like how 904 refers to 954. Seems Congress has too much time on its hands :).
Thanks,
David
ira smilovitz
May 28, 2012, 2:06:14 PM5/28/12
to
On Monday, May 28, 2012 10:50:23 AM UTC-4, David Rosenbaum wrote:
[snipped]
>
> Thanks.
>
> You're correct that the instructions don't include it in passive. But
> the language used was "Passive income generally includes dividends"
> etc. Implication is that it could include other things. I haven't
> checked the Code.
>
> David
I would have interpreted the quoted language the other way around. That is, although passive income generally includes dividends there are circumstances where dividends are not passive income.
Ira Smilovitz
[snipped]
>
> Thanks.
>
> You're correct that the instructions don't include it in passive. But
> the language used was "Passive income generally includes dividends"
> etc. Implication is that it could include other things. I haven't
> checked the Code.
>
> David
Ira Smilovitz
Alan
May 28, 2012, 2:27:47 PM5/28/12
to
On 5/28/12 8:50 AM, David Rosenbaum wrote:
> On May 25, 10:23 pm, Alan<tempu...@vacationmail.com> wrote:
>> On 5/25/12 9:44 AM, David Rosenbaum wrote:> Here's a bit of a weird question. When claiming a foreign tax credit
>>> using Form 1116, income needs to be categorized.
>>
>>> Should unemployment compensation (foreign, obviously) be reported as
>>> passive or as general limitation?
>>
>>> Thanks for any ideas.
>>
>>> David Rosenbaum
>>
>> It's not a lump sum distribution using averaging.
>> It's not income resourced by treaty.
>> It's not Sec. 901(j) income.
>> It's not in the definition for passive income.
>>
>> Therefore, I must conclude that it is general category income.
>>
>> --
>> Alanhttp://taxtopics.net
>
> Thanks.
>
> You're correct that the instructions don't include it in passive. But
> the language used was "Passive income generally includes dividends"
> etc. Implication is that it could include other things. I haven't
> checked the Code.
>
> David
>
The way the law is written, there are 7 categories defined. (I didn't
> On May 25, 10:23 pm, Alan<tempu...@vacationmail.com> wrote:
>> On 5/25/12 9:44 AM, David Rosenbaum wrote:> Here's a bit of a weird question. When claiming a foreign tax credit
>>> using Form 1116, income needs to be categorized.
>>
>>> Should unemployment compensation (foreign, obviously) be reported as
>>> passive or as general limitation?
>>
>>> Thanks for any ideas.
>>
>>> David Rosenbaum
>>
>> It's not a lump sum distribution using averaging.
>> It's not income resourced by treaty.
>> It's not Sec. 901(j) income.
>> It's not in the definition for passive income.
>>
>> Therefore, I must conclude that it is general category income.
>>
>> --
>> Alanhttp://taxtopics.net
>
> Thanks.
>
> You're correct that the instructions don't include it in passive. But
> the language used was "Passive income generally includes dividends"
> etc. Implication is that it could include other things. I haven't
> checked the Code.
>
> David
>
show all 7 because your situation would not have included all 7.) If you
don't fall into one of the defined 7, then you fall into general
limitation. Unemployment compensation is not included in any of the 7.
Therefore, it is general limitation.
Passive income is defined in IRC Sec. 904(d) and its regulations at
1.904-4 and various court decisions.
--
Alan
http://taxtopics.net
David Rosenbaum
Jun 6, 2012, 11:32:35 AM6/6/12
to
On May 28, 9:27 pm, Alan <tempu...@vacationmail.com> wrote:
> On 5/28/12 8:50 AM,DavidRosenbaumwrote:
> >> On 5/25/12 9:44 AM,DavidRosenbaumwrote:> Here's a bit of a weird question. When claiming a foreign tax credit
Thanks!
David
> On 5/28/12 8:50 AM,DavidRosenbaumwrote:
> >> On 5/25/12 9:44 AM,DavidRosenbaumwrote:> Here's a bit of a weird question. When claiming a foreign tax credit
David
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