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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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I sold rental property in Australia in 2011 and I am told by

Customer Question

I sold rental property in Australia in 2011 and I am told by my accountant there that I will owe appx $58,000 Australian income tax. I am having a hard time filling out form 1116. I need help.
Submitted: 2 years ago.
Category: Tax
Expert:  Jax Tax replied 2 years ago.

Jax Tax : Lets start with the purpose of the form. Since you are also required to report the sale of the home on your US tax return, you mist complete the form so that you get credit for the tax due in Australia.
Jax Tax : This prevents double taxation.
Jax Tax : Since we are dealing with capital gains, you must first determine the US tax calculated based off the sale.
Jax Tax : This will establish the foreign tax credit limit. For example, if the US tax on this capital gain is 15k, your credit is limited to 15k.
Jax Tax : Have you done this?
JACUSTOMER-9u4s0cdn- :

I have completed Form 4797 and the gain from that property is $487,817. So how do I calculate the US on that? I also have a long term loss carryforward and another US current year loss that eats up all but $86000 of that gain.

JACUSTOMER-9u4s0cdn- :

did you get my first reply?

Jax Tax : Sorry, another expert had me.locked out.
Jax Tax : I am here.
Jax Tax : It seems you need the entire return completed. To do this by chat with me asking you every line of the return will take hours.
Jax Tax : I am sorry, but it is not.going to work. I suggest you hire someone to do the return. I will opt out so other experts can try to Assistance.
Expert:  Lev replied 2 years ago.
Hi and welcome to Just Answer!
I am not clear what issues do you have with form 1116?
Please post line numbers and amounts - I will verify your calculations.
Customer: replied 2 years ago.
How do I determine Line 15, Adjustments to line 14? Line 9 is the estimated foreign tax to be paid $58,000 and line 14 is the foreign gain of $463,817
Expert:  Lev replied 2 years ago.
According to instructions - the amount on line 15 is your taxable income (or loss), before adjustments, from sources outside the United States.
You also need to prepare your Australian income tax return and know exact amounts of taxable income and foreign tax liability.

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