I have two offshore bank accounts that earn passive category income.
One bank account is a regular interest-earning checking account and the foreign bank takes 35% as withholding tax from the interest earned at the end of each year.
The other account is more or less the equivalent of a Rollover IRA here in the USA and therefore the foreign bank does not deduct any withholding tax from the interest earned.
Question: On Part I, line 1a, column A, of Form 1116 do I include the gross income from both accounts or just the one with the 35% withholding tax?
The way I see it, I should be reporting only the gross income from the account subject to the 35% withholding tax. It is the only one taxed by the offshore bank and the only one that will allow me to take a foreign tax credit on Form 1040.
What's your opinion?