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Form 1116 Social Security Benefits included?

Technical topics regarding tax preparation.
#1
HWCPA  
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I'm working with Drake Tax software and they include the gross Social Security Benefits in the calculation of Line 3e on Form 1116 Gross Income from All Sources.

However, ATX doesn't include it in their calculation.

I've tried researching to see if Gross SS Benefits need to be included but can't find anything conclusive.

Two different programs, two different results....

Anybody run across this and/or know the answer? Thanks!
 

#2
Skatter  
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Gross income is all income received that is not exempt from tax.

IRC Sec. 86 includes social security benefits in gross income but only to the extent determined by the familiar algorithm that excludes at least 15% of the benefit.
"...Except as provided in paragraph (2), gross income for the taxable year of any taxpayer described in subsection (b) (notwithstanding section 207 of the Social Security Act) includes social security benefits in an amount equal to the lesser of— ..."

Based on that reading, it seems to me that 15% of benefits should never end up in gross income for the 1116.

I'm pretty sure Ultra Tax CS also doesn't include it. So, yes, I think Drake is in error.
 

#3
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Pretty sure that line 3e should only include the taxable portion of the social security. Usually Form 1116 line 3e will equal total income on page 1 of tax return.
 

#4
Skatter  
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Seaside CPA wrote: Usually Form 1116 line 3e will equal total income on page 1 of tax return.


I'd change that word "usually" to "sometimes." The frequently seen exceptions come when there are Schs. C, D, or E with the return. Gross income doesn't include losses or business/rental deductions.
 

#5
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Would someone try to help me understand this line 3e Gross income? I've looked at the instructions for 1116 and tried looking in the code but am still scratching my head. I don't doubt that Skatter is right, but how do you know that?
'Gross' income from a business is generally revenue minus COGS, but why would that be the number to put on 3e? Total rents received minus allowable expenses and depreciation is the number that is included in 'total' income before subtracting adjustments to arrive at adjusted 'gross' income, and so on to arrive at taxable income. Why then would I include total rents received on line 3e? As I understand the limitation calculation it is U.S. income tax before credits × (foreign source taxable income ÷ total taxable income). Total rents received is not a component of total taxable income. What am I missing?
 

#6
Smktax  
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Below line 3e are the expense lines. You still end up with the same net income.
 

#7
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Thanks. I really got hung up on line 3e not representing any number from the tax return. I do see line 18 is actually taxable income and it is what is used in the calculation I was expecting.
 


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