I invested in a company based in India that has a stock ADR in the United States. The proceeds from the sale were withheld and now I'm wondering if I can claim a tax credit on the amount withheld?

ANSWER

The BIDaWIZ Team's Answer:

You may be eligible to claim the foreign tax credit via Form 1116 and report it via line 47 of your form 1040. However, you need to recognize that you cannot claim the credit on the full amount - rather on the difference between the amount you would be taxed in the US vs. withholding. You would need to complete the capital gains tax worksheet as well associated with that form. There may also be ADR fees that were incorporated in the proceed amounts. Those would be deductible via Schedule A of your Form 1040 as an itemized expense. You will need a break-out of that information. The above information is referenced in IRC Section 901 and IRS Publication 514