I am helping a relative fill out their 1040 tax
form for 2012 and need help filling out form 1116 - Foreign Tax Credit
. They are US citizen, resident of foreign country. They have rental property outside US as well as interest income from banks outside US (all considered passive income
?). Schedule E has been filled for the rental properties, and interest income has been reported on 1040.
Is gross income reported in Part I line 1a rental income + interest income?
Where do they claim expenses directly related to the rental income (maintenance, repairs, management fees, insurance) - is it line 2?
Are property taxes and mortgage interest for these rental properties claimed on a different line from expenses - is it line 4b for the mortgage interest?
What happens to the Foreign Tax Credit carryover when a spouse passes away (they have been joint filing for years) - does it need to be recalculated for the remaining spouse's portion or can it be carried over as is? A general example: Carryover from 2005 - $1500, Carryover from 2006 - $1000/ both spouses filed jointly to US those years.
They did not file form 1116 with 2011 tax form. No taxes were owed to US in 2011 (they have been filing 1040 ever year regardless of whether money is owed or not) - should they amend 2011 tax form with 1116 anyway?
They have US pension that is taxed in the foreign country, do they need to fill out another form 1116? The income tax
paid to foreign country is a combination of US income and income earned in that foreign country - can they only claim a portion of that tax on form 1116?
Thank you so much for your help. I tried to call the IRS International Line but it seems that the number is XXXXX longer in service.