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Pengrowth Energy Corporation Message Board

  • Timothy123 Timothy123 Apr 8, 2009 2:33 PM Flag

    Foreign tax credit- a pecentage only?-

    I am having H&R Block do my return. They have my K-1 and they are only allowing a percentage of the foreign tax paid to offset my Fed tax. Anyone else know about this limitation? It does not sound correct. I am talking about a total foreign tax paid of $196 and I only got a $21 credit. Does this make sense to anyone else? It seems to me most are simply puting the full amount on Line 47 but are those people doing this incorrectly?

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    • IRS instructions for line 47 states that all of your foreign source income has to be from interest and dividends, since this is royalties you have to use 1116

      • 1 Reply to slewfan
      • So let's say that 15% of the dividend is withheld for foreign taxes. And let's say that the K1 shows that half of that is a non-taxable return of capital.

        (It's been a couple weeks since I paid my taxes, I may be misremembering things)
        This results in the following:
        You cannot claim the full credit for foreign taxes paid, since the amount which you would pay in US taxes is less. There's a little math to determine how much of it you can claim as a credit. The excess gets carried over.

        This would seem to imply that if / when a US owner of PGH sells (wishful thinking applies), that the carryover might be applied against the capital gains (if any)?

    • This is correct. Any unused amount can be carried over to 2009.
      I paid over $2,500.00 in Canadian taxes in 2008. No way do you
      get back dollar for dollar as a credit against U.S. taxes. Form
      1116 takes care on that!!

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