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Discussion:"Gross income from all sources" for 1116

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Discussion Forum Index --> Tax Questions --> "Gross income from all sources" for 1116

Nightsnorkeler (talk|edits) said:

22 August 2013
So I just finished a tax return for a client who is a shareholder in an S-Corp which has Foreign Tax Credits flowing through to his personal tax return. When I prepare his 1116, our software correctly (in my opinion) calculates his "gross income from all sources" on Line 3e, by including all of the gross income reported on his personal tax return. We always prove this number and verify that the software has calculated it correctly.

The issue here is that when we have the same situation for a client who is a partner in a partnership, we always include the clients share of the gross income from the partnership in this calculation. This is in accordance with the definition of gross income, particularly Section 61(a)(13). My associate feels that in the case of our shareholder client, we should include the shareholder's percentage of gross income from all sources as reported by the S-Corp in the statements attached to the K-1. While I completely agree that a partner in a partnership needs to include this amount as gross income, I do not agree that we need to include this amount for shareholders in an S-Corp (or any corporation for that matter).

I have read through the instructions for the 1116, Section 61, Section 901, and cannot find anything that would tell me that I am wrong. Of course we all know that it is difficult to prove that something doesn't exist, but does anyone have any other information that I can present to my associate to prove to him that yes, we do include the partner's share of gross income from a partnership on this line, but no, we do not include the shareholder's share of gross income from an S-Corp? Or am I just completely wrong?

Podolin (talk|edits) said:

22 August 2013
Sec 1366(c)

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