International Taxation: Foreign Tax Credit and Form 1116

Categories: Federal Tax, IRS CE
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About Course

This two-hour continuing education course provides tax professionals with a practical understanding of the Foreign Tax Credit under IRC §901 and its computation on Form 1116. The course is designed for enrolled agents and other tax return preparers who prepare returns for clients with foreign-source income, foreign tax withholding, or foreign investment holdings.

Participants examine the requirements for a foreign levy to be a creditable tax, the credit-or-deduct election, and the interaction with the Foreign Earned Income Exclusion. The course provides detailed coverage of Form 1116 income categories and sourcing rules, including the high-tax kickout rule and the ratable apportionment of deductions. Students also study the FTC limitation computation, the mandatory carryback and carryforward of excess credits, and foreign tax redeterminations. The course concludes with special situations — the corporate FTC framework and Form 1118, and recognition-level treatment of CFC and GILTI issues.

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What Will You Learn?

  • Determine whether a foreign levy is a creditable tax under IRC §901 and Treas. Reg. §1.901-2
  • Apply the annual credit-or-deduct election and its interaction with the Foreign Earned Income Exclusion
  • Classify foreign-source income into the correct Form 1116 category and apply the high-tax kickout rule
  • Apply ratable apportionment of deductions not definitely related to a specific class of income
  • Compute the FTC limitation and apply the mandatory one-year carryback and ten-year carryforward of excess credits
  • Recognize corporate FTC filing requirements and identify CFC/Subpart F/GILTI issues warranting specialist referral

Course Content

Module 1 – Foreign Tax Credit Fundamentals — IRC §901
This module covers Foreign Tax Credit fundamentals under IRC §901 — the creditable tax requirements under Treas. Reg. §1.901-2, the credit-or-deduct election, and the interaction between the Foreign Earned Income Exclusion and the FTC.

  • Foreign Tax Credit Fundamentals — IRC §901

Module 2 – Form 1116 Income Categories, Sourcing, and Allocation of Deductions
This module addresses Form 1116 income categories and sourcing rules, including the passive and general category baskets, the high-tax kickout rule, sourcing of compensation for personal services, and the ratable apportionment of deductions not definitely related to a specific class of income.

Module 3 – FTC Limitation, Carryback/Carryforward, and Foreign Tax Redeterminations
This module examines the FTC limitation computation, the mandatory one-year carryback and ten-year carryforward of excess credits within the same category, and the notification and amended-return obligations arising from a foreign tax redetermination.

Module 4 – Special Situations, Corporate Comparison, and Practitioner Compliance
The final module covers special situations including the corporate de minimis exception (or lack thereof) and Form 1118, recognition-level treatment of CFC/Subpart F/GILTI issues and Form 5471 filing triggers, and practitioner compliance obligations under Circular 230.

Final Assessment – International Taxation: Foreign Tax Credit and Form 1116
You have completed a comprehensive review of the Foreign Tax Credit rules under IRC §901 and Form 1116, covering creditable tax requirements, income categories and sourcing, the FTC limitation computation, carryback and carryforward of excess credits, foreign tax redeterminations, and special situations including corporate FTC compliance and CFC/Subpart F/GILTI recognition. You are now prepared to demonstrate your understanding of the key concepts. The following final examination assesses your knowledge of the material covered in all four modules. A passing score of 70% is required to successfully complete the course.

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