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Can franking credit on an Australian income tax return be

Customer Question
used on Form 1116 as...
Can franking credit on an Australian income tax return be used on Form 1116 as tax paid on the franked distributions?
JA: The expert will know how to help. Please tell me more, so we can help you best.
Customer: Client set up a trust which distributed franked distributions of $50,750 AUD. The franking credit on the Australian return is $15,225. Can I use this franking credit as a tax paid on dividend on the client's Form 1116?
JA: Is there anything else the expert should be aware of?
Customer: I do not think so.
Submitted: 4 months ago.Category: Tax
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Answered in 3 minutes by:
7/27/2017
Tax Professional: Robin D., Senior Tax Advisor 4 replied 4 months ago
Robin D.
Robin D., Senior Tax Advisor 4
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Tax Professional: Robin D., Senior Tax Advisor 4 replied 4 months ago

In Australia, dividends are only taxed once via franking credits. A franking credit is a tax credit that is given to shareholders who receive dividends on equities. Investors who receive corporate dividends get a corresponding franking credit that can be claimed on their tax returns. Using the franking credit, the shareholder ends up paying only their marginal tax rate on the full dividend.

You would not use the same on the US return under 1116.

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Tax Professional: Robin D., Senior Tax Advisor 4 replied 4 months ago

A positive 5 star rating is appreciated so I am credited for assisting.

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Tax Professional: Robin D., Senior Tax Advisor 4 replied 4 months ago

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