Assumptions for 2010 Return using Turbotax:
Filing MFJ
Foreign (Canada) Taxes Available for credit -- Line 13 Form 1116 = 860 Income before Exemptions -- Line 41 1040 and Line 17 Form 1116 = 54,000 Dividends from Foreign Sources -- Line 7 and line 16 Form 1116 = 4620
Line 19 Tax Due -- Line 44 1040 and Line 19 of 1116 = 4900
Line 18 Divide Line 16 by Line 17 of Form 1116 -- 4620/54000 = .0856
Line 20 1116 Line 18 X Line 19 -- Max Credit = 419 to Line 47 Form 1040
Questions:
(1) My understanding is that while the amount of tax withheld by Canada is based on a 15% rate, my tax rate is less then 10%. Therefore, I am not entitled to the full Foreign Tax Credit. Is that right?
(2) The balance of the available credit 860-419 = 441 is carried forward. However, since I don't expect my tax rate to ever get above 10%, I assume I will never be able to take advantage of the forwarded tax credit. Is that correct?