Unemployment compensation - category for foreign tax credit

It's not a lump sum distribution using averaging. It's not income resourced by treaty. It's not Sec. 901(j) income. It's not in the definition for passive income.

Therefore, I must conclude that it is general category income.

I think it is general income because it's a division of wages/salary

BEGIN QUOTE

(B) Passive income (i) In general Except as otherwise provided in this subparagraph, the term ''passive income'' means any income received or accrued by any person which is of a kind which would be foreign personal holding company income (as defined in section 954(c)).

(ii)

END QUOTE

There are also parts (ii) to (v) though I don't think they apply here.

BEGIN QUOTE

(c) Foreign personal holding company income (1) In general For purposes of subsection (a)(1), the term ''foreign personal holding company income'' means the portion of the gross income which consists of: (A) Dividends, etc. Dividends, interest, royalties, rents, and annuities. (B) Certain property transactions ... (C) Commodities transactions ... (D) Foreign currency gains ... (E) Income equivalent to interest ... (F) Income from notional principal contracts ... (G) Payments in lieu of dividends ... (I) Personal service contracts ...

END QUOTE

These statutes are very complicated and have lots of clauses that don't apply to most people, like (B) to (I) above, and one sections refers to another like how

904 refers to 954. Seems Congress has too much time on its hands :).

When claiming a foreign tax credit

Thanks.

You're correct that the instructions don't include it in passive. But the language used was "Passive income generally includes dividends" etc. Implication is that it could include other things. I haven't checked the Code.

David

wages/salary

QUOTE

QUOTE

to most people, like (B) to (I) above, and one sections refers to another like how 904 refers to 954.  Seems Congress has too much time on its hands :).

Sounds good.

Thanks,

David

[snipped]

I would have interpreted the quoted language the other way around. That is, although passive income generally includes dividends there are circumstances where dividends are not passive income.

Ira Smilovitz

question. When claiming a foreign tax credit

The way the law is written, there are 7 categories defined. (I didn't show all 7 because your situation would not have included all 7.) If you don't fall into one of the defined 7, then you fall into general limitation. Unemployment compensation is not included in any of the 7. Therefore, it is general limitation.

Passive income is defined in IRC Sec. 904(d) and its regulations at

1.904-4 and various court decisions.

When claiming a foreign tax credit

Thanks!

David