I have a capital gains question on foreign property that I owned while a US citizen. I want to claim the foreign tax credit for capital gains I paid while in India. How much of Indian capital tax is eligible for foreign tax credit?

ANSWER

The BIDaWIZ Team's Answer:

Your passive income from foreign sources in India is treated separately from US capital gain sources. The foreign tax credit for your capital gains in India is calculated using form 1116. Specifically, you would first calculate the ratio of foreign taxable passive category income to total taxable income. Then, you would multiply your US income tax by this ratio in order to come up with the maximum foreign tax credit allowed in the passive income category.