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Do we report rental on a foreign property as income on the us tax return? I understand that we do but client insist he is NOT required?
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I am looking at his SchB(Form1116) from 2021 1040 and I will be honest this is my first time actually handling this type of return. I just want to make sure that I am understanding this correctly. I also second guess myself.
Page one just has Passive box checked and line 8 has a zero, under the 10th year. Page two is what I am needing the clarification.
Line 1 has $1372.00 under 1st Preceding Tax Year (PTY) and then that same 1372.00 was carried over to total column
Line 3 has the same $1372.00 in the same columns as mentioned above.
Line 6 has $2063 in columns for Current Year and Total
Line 8 has $1372 in column 1st PTY, $2063 in Current Tax Year and $3435 in the total column.
Can you confirm this is showing no carryover?
You can see whether there are foreign taxes carrying over by looking at Page 2 of the Form 1116. If Line 14 is the same as Line 24, there's no carryover.
On the Sch B of the 1116, the zero on Line 8 under the 10th year is pre-printed, because the carryover expires after 10 years.
On page 2, the total carryover is $3,435.
I think you should consider sending this client to someone who sees more foreign source income. I do a fair amount of "normal" foreign, and I'd have to do some un-fun reading to be sure I was getting a foreign rental property right. If the client was already arguing that their foreign source income wasn't reportable, I wouldn't even find a better home for them as I declined their business.
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