IRS Practice Unit: Qualified Dividend, Capital Gain Rate Differential in Computing Foreign Tax Credit (IRC §904)

Examining the steps necessary to compute the rate differential adjustment for U.S. individual taxpayers in determining a foreign tax credit, the IRS Large Business and International Concept Unit outlined in a practice unit released January 5. Due to the preferential tax treatment of capital gains and qualified dividends under U.S. tax law, an adjustment is required to reduce the amount of foreign source capital gains and qualified dividends by a rate differential when computing the FTC, the IRS noted. The steps taken to make this determination are: (1) determine if taxpayer is subject to preferential tax rate under tax code ...