Let's say in 2009 you were subject to the US AMT and had a foreign tax credit as computed by Form 1116. In that year, you would prepare two
Now in 2010 assume you are no longer subject to the AMT. Do you compute the carryover for the 2010 1116 based on the credit you actually received in 2009, even though it was derived from the AMT
Everybody is subject to the AMT, just like everybody is subject to Income Tax. For some people, the amount of AMT (or Income Tax) is $0.
Calculate Income Tax (non-AMT) using the non-AMT credit amount, and AMT using the AMT credit amount.
Seth
Seth, fine, you calculate your taxes using both methods. The problem is you pay using only one method. So if the foreign tax credit carryover is calculated using only the corresponding tax code, you could end up getting a credit greater than the foreign taxes paid.
E.g., in 2009 you paid $10,000 in foreign taxes. Your AMT FTC limit is $6,000, so you can carry over $4,000 to next year's AMT FTC calculation. Your regular FTC limit is $1,000, so you can carry over $9,000. You are subject to the AMT, so you get the AMT credit of $6,000.
Now in 2010, you paid $8,000 in foreign taxes and are subject to the regular tax. Your AMT FTC limit is $5,000, so you can carry over $7,000 ($4,000 from 2009 plus $3,000 from 2010). Your regular FTC limit is $20,000, so you can take a credit of $17,000 ($9,000 carried over from last year plus $8,000 in foreign taxes paid this year) and have no credit to carry over to next year.
The problem with this, of course, is that you wind up getting a total credit of $23,000 including the $6,000 you received last year. This is more than the total foreign taxes paid, $18,000, so can't be correct.
What am I missing here?
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