# Help with Form 1116



## Clarepreston (Oct 9, 2016)

Hello,

I am claiming the FTC for the first time this year. Previously I have always used 2555. 
I made some IRA withdrawals in 2017 for the first time, as well as my modest UK income, for which I have paid HMRC tax, which I'd like to claim as foreign tax credit.
I understand that I have to use 2 X 1116. 

Question 1.The self employed income will be general category "b", but what do I put the IRA withdrawal into? Is it passive category "a" or certain income resourced by treaty "d"

Question 2. If it is "d", do I also have to fill form 8833? 

Question 3. I paid HMRC the total tax for all the income but I guess I'll have to figure out what proportion of tax relates to each category to record on each 1116. Is that correct?

Thank you for any advice you can give. 2555 was easy, but this will save me $$ if I can figure it out.


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## Moulard (Feb 3, 2017)

I believe taxes on IRA distribution would be passive category. 

Income re-sourcing is a magical wave of the hand that is used to pretend income from one country is actually income from another. The only "real" example that I know of this is in the Australian - Timor L'este treaty related to oil and gas extraction along the border between the two countries.


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## Bevdeforges (Nov 16, 2007)

As far as I know, IRA distributions are pensions, which are passive income. But do check the US-UK tax treaty. The UK is one of those countries that has asserted the exclusive right to tax US Social Security, so you should check the treaty to see if by some chance IRA distributions are considered to be "government pensions" like Social Security is. 
Cheers,
Bev


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## Clarepreston (Oct 9, 2016)

Moulard said:


> I believe taxes on IRA distribution would be passive category.
> 
> Income re-sourcing is a magical wave of the hand that is used to pretend income from one country is actually income from another. The only "real" example that I know of this is in the Australian - Timor L'este treaty related to oil and gas extraction along the border between the two countries.


Thanks, that makes it easier.


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## Clarepreston (Oct 9, 2016)

Bevdeforges said:


> As far as I know, IRA distributions are pensions, which are passive income. But do check the US-UK tax treaty. The UK is one of those countries that has asserted the exclusive right to tax US Social Security, so you should check the treaty to see if by some chance IRA distributions are considered to be "government pensions" like Social Security is.
> Cheers,
> Bev


 Thanks so much.


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## JustLurking (Mar 25, 2015)

Clarepreston said:


> I made some IRA withdrawals in 2017 for the first time, as well as my modest UK income, for which I have paid HMRC tax, which I'd like to claim as foreign tax credit.


This flowchart might help. As far as I can tell, the part that would apply here is '_U.S. Non-Gov't Non Lump-Sum_':


> Paragraph 1(a) of Article 17 does not apply to the U.S. Thus, the income can be taxed in the U.S., regardless of whether it can be taxed in the U.K. For U.S. citizens that are U.K. residents and are taxed on the income in the U.K., the U.S. sourced income may need to be resourced as foreign source income under the treaty in order to be able to claim foreign tax credits. The income should be in the Treaty resourced basket, and no treaty disclosure would be required.


A couple of disclaimers, though. Firstly, the flowchart appears accurate but you should check it closely. And secondly, I'm not in the same situation as you -- not a US citizen (hooray!) -- and so don't have firsthand experience of this particular case.

And yes, I'm aware that this appears to conflict with the responses you've received here so far. :-(


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## Clarepreston (Oct 9, 2016)

Thanks Just Lurking. I'll do some homework on this before filing, but at least it seems that if it belongs in category d, I won't need the 8833 (which seemed complex at first glance). I'm talking about a tax credit of about $8000 so obviously I want to get it right.


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## Clarepreston (Oct 9, 2016)

Clarepreston said:


> Thanks Just Lurking. I'll do some homework on this before filing, but at least it seems that if it belongs in category d, I won't need the 8833 (which seemed complex at first glance). I'm talking about a tax credit of about $8000 so obviously I want to get it right.


Just looked at that flowchart. It is very helpful.


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## Clarepreston (Oct 9, 2016)

Clarepreston said:


> Just looked at that flowchart. It is very helpful.


Thanks to all of you for your help with 1116. Just checked the IRS refund site, and my refund has been approved, and should be in the bank on Wednesday


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