Guide to Global Payroll Management - 2020 - D-127

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Appendix D--Federal Forms and Instructions

distributions taxed at the 0% rate by not
including them on line 1a.
Don't adjust the amount of any
foreign source qualified
CAUTION dividends or capital gain
distributions that you elected to include
on Form 4952, line 4g.

No adjustments required. If you
aren't required to adjust the amount of
your foreign source qualified dividends
or capital gain distributions, or you
qualify for the adjustment exception and
elect not to adjust these items, include
the amount of your foreign source
qualified dividends and capital gain
distributions in each separate category
(without adjustment) on line 1a of the
applicable Form 1116.

Qualified Dividends Tax
Worksheet (Estates and Trusts)

If you completed the Qualified
Dividends Tax Worksheet in the
Instructions for Form 1041, you must
adjust the amount of your foreign source
qualified dividends if:
* Line 5 of the Qualified Dividends Tax
Worksheet is greater than zero, and
* Line 21 of the Qualified Dividends
Tax Worksheet is less than line 22 of
that worksheet.
Adjustment exception. If you qualify
for the adjustment exception, you can
elect not to adjust your foreign source
qualified dividends. You make this
election by not adjusting these
dividends. If you make this election, you
must elect not to adjust any of your
foreign source qualified dividends.
See section 904(b) and the regulations
issued under that Code section to
determine if you qualify for the
adjustment exception.

How to make adjustment. To adjust
your foreign source qualified dividends,
multiply your foreign source qualified
dividends in each separate category by
0.4054 if the foreign source qualified
dividends are taxed at a rate of 15%,
and by 0.5405 if they are taxed at a 20%
rate. Include the results on line 1a.
You adjust your foreign source
qualified dividends taxed at the 0% rate
by not including them on line 1a.
Don't adjust the amount of any
foreign source qualified
CAUTION dividends that you elected to
include on Form 4952, line 4g.

No adjustment required. If you aren't
required to make adjustments to your
foreign source qualified dividends (or
you qualify for the adjustment exception

and you elected not to adjust these
dividends), include your foreign source
qualified dividends on line 1a of the
applicable Form 1116 without
adjustment.

Schedule D Filers

Note. Throughout these instructions,
references to Schedule D (Form 1041)
are for estates and trusts only.

Adjustments to foreign qualified dividends. If you are required to file
Schedule D (Form 1040 or 1040-SR or
Form 1041), you must adjust the
amount of your foreign source qualified
dividends that you include on line 1a of
Form 1116 if one of the following
applies to you.
1. You figured your tax using the
Qualified Dividends and Capital Gain
Tax Worksheet in the Form 1040 or
1040-SR instructions, line 7 of that
worksheet is greater than zero, and
line 25 of that worksheet is less than
line 26.
2. You figured your tax using the
Qualified Dividends and Capital Gain
Tax Worksheet in the Form 1040-NR
instructions, line 5 of that worksheet is
greater than zero, and line 23 of that
worksheet is less than line 24.
3. You figured your tax using
Schedule D (Form 1041), line 27 of
Schedule D is greater than zero, and
line 43 of Schedule D is less than
line 44.
4. You figured your tax using the
Schedule D Tax Worksheet (in the
Schedule D (Form 1040 or 1040-SR)
instructions), line 18 of the Schedule D
Tax Worksheet is greater than zero, and
line 45 of the Schedule D Tax
Worksheet is less than line 46.
5. You figured your tax using the
Schedule D Tax Worksheet (in the
Schedule D (Form 1041) instructions),
line 17a of the Schedule D Tax
Worksheet is greater than zero, and
line 42 of the Schedule D Tax
Worksheet is less than line 43.
Adjustment exception. If you
qualify for the adjustment exception,
you can elect not to adjust your foreign
source qualified dividends. You make
this election by not adjusting these
dividends or your foreign capital gains
(or losses). If you make this election,
you must elect not to adjust any of your
foreign source qualified dividends. You
qualify for the adjustment exception if
the amount of your foreign source net
capital gain, plus the amount of your
foreign source qualified dividends, is
-8-

less than $20,000 and one of the
following applies to you.
1. Line 7 of the Qualified Dividends
and Capital Gain Tax Worksheet in the
Form 1040 or 1040-SR instructions or
line 18 of the Schedule D Tax
Worksheet in the Schedule D (Form
1040 or 1040-SR) instructions is less
than or equal to:
a. $321,450 if married filing jointly or
qualifying widow(er),
b. $160,725 if married filing
separately,
c. $160,725 if single, or
d. $160,700 if head of household.
2. Line 5 of the Qualified Dividends
and Capital Gain Tax Worksheet in the
Form 1040-NR instructions or line 18 of
the Schedule D Tax Worksheet in the
Schedule D (Form 1040 or 1040-SR)
instructions is less than or equal to:
a. $321,450 if you checked filing
status box 6,
b. $160,725 if you checked filing
status box 5, or
c. $160,725 if you checked filing
status box 2.
For trusts and estates, see section
904(b) and the regulations issued under
that Code section to determine if you
qualify for the adjustment exception.
See special rules if you are subject to
the alternative minimum tax.

Note. Your foreign source net capital
gain is the excess of your net long-term
capital gain from foreign sources over
your net short-term capital loss from
foreign sources. Ignore any long-term
capital gains you elected to include on
Form 4952, line 4g, in determining your
foreign source net capital gain. Ignore
any qualified dividends you elected to
include on Form 4952, line 4g, in
determining the amount of your foreign
source qualified dividends.
How to make adjustment. To
adjust your foreign source qualified
dividends, multiply your foreign source
qualified dividends in each separate
category by 0.4054 if the foreign source
qualified dividends are taxed at a rate of
15%, and by 0.5405 if they are taxed at
a 20% rate. Include the results on
line 1a of the applicable Form 1116.
You adjust your foreign source
qualified dividends taxed at the 0% rate
by not including them on line 1a.

Instructions for Form 1116 (2019)

D-127

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