Michael, got it and thanks for answering. Perhaps an idea for another article. Don't think I've seen anything about Net Unrealized Appreciation (NUA) rollovers on Humble Dollar.
That sheds some new light on the US verses foreign source income. However, I don't think that this is an issue that we as the shareholders of a US mutual fund have to sort out. The mutual fund company sorts it out. Looking at my consolidated 1099 from Vanguard this year I find in the Mutual Fund and UIT Supplemental Information section for Total International that 81.96% of the total income from that fund is foreign source income. From the Detail for Dividends and Distributions section I find that the Total Dividends & distributions from this fund is X amount. Thus, my foreign source income from whatever qualifies as foreign source income is 81.96% of X.
If you don't qualify for "adjustment exception" then
adjust your foreign source qualified dividends or capital gain distributions, multiply your foreign source qualified dividends or capital gain distributions in each separate category by 0.4054 if the foreign source qualified dividends or capital gain distributions 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 or capital gain distributions taxed at the 0% rate by not including them on line 1a.
This is from page 9 of the instructions. Looks like just straight multiplication. What am I missing?
my understanding is that while dividends count as foreign income, capital gain distributions do not.
Don't think that is so. On page 6 of the instructions under Categories of Income c. Passive Income it says,
Capital gains not related to the active conduct of a trade or business are also generally passive income.
I've been filing an 1116 for years and don't find it all that complicated. I will caveat that statement that the fact that all my foreign holdings are mutual funds.
Investing Tax-free and qualified funds in foreign markets would incur double-taxation.
This appears to be incorrect for tax-free accounts. If your investments in foreign markets are held in a tax-free account, such as a Roth IRA, your foreign income will be subject to foreign taxes, and you will get no US tax credit. However, if you withdraw that foreign income from your Roth it will be tax free. Thus, you do avoid US taxes but not the foreign taxes.I agree that foreign income in a qualified account (traditional IRA) would be subject to double income taxation.Given the above, I keep most of my Vanguard Total International Fund holdings in my regular brokerage account and the rest in my Roth.
Perhaps you are confusing deductible with out-of-pocket maximum? We have a high-deductible plan and the family deductible is $4,000 while the family out of pocket maximum is $10,000
Comments
Michael, got it and thanks for answering. Perhaps an idea for another article. Don't think I've seen anything about Net Unrealized Appreciation (NUA) rollovers on Humble Dollar.
Post: Blood Money
Link to comment from April 5, 2026
Since you are selling stocks in your 401k why do you care what the cost basis is?
Post: Blood Money
Link to comment from April 3, 2026
Paul Ward specifically stated that outright gifting "exposes the property to the claims of the recipient's creditors" and NOT the giver.
Post: Medicaid Asset Protection Trusts (MAPTs)
Link to comment from March 18, 2026
Agree. But if the gift is to a child under eighteen who is going to sell it to pay for college you have to ask youself, what creditors?
Post: Medicaid Asset Protection Trusts (MAPTs)
Link to comment from March 17, 2026
Why not just gift the condo and avoid the expenses and hassle of a trust?
Post: Medicaid Asset Protection Trusts (MAPTs)
Link to comment from March 16, 2026
That sheds some new light on the US verses foreign source income. However, I don't think that this is an issue that we as the shareholders of a US mutual fund have to sort out. The mutual fund company sorts it out. Looking at my consolidated 1099 from Vanguard this year I find in the Mutual Fund and UIT Supplemental Information section for Total International that 81.96% of the total income from that fund is foreign source income. From the Detail for Dividends and Distributions section I find that the Total Dividends & distributions from this fund is X amount. Thus, my foreign source income from whatever qualifies as foreign source income is 81.96% of X.
Post: Taxes on foreign stocks
Link to comment from February 21, 2026
If you don't qualify for "adjustment exception" then
This is from page 9 of the instructions. Looks like just straight multiplication. What am I missing? Don't think that is so. On page 6 of the instructions under Categories of Income c. Passive Income it says,Post: Taxes on foreign stocks
Link to comment from February 20, 2026
I've been filing an 1116 for years and don't find it all that complicated. I will caveat that statement that the fact that all my foreign holdings are mutual funds.
Post: Taxes on foreign stocks
Link to comment from February 19, 2026
Post: Taxes on foreign stocks
Link to comment from February 19, 2026
Perhaps you are confusing deductible with out-of-pocket maximum? We have a high-deductible plan and the family deductible is $4,000 while the family out of pocket maximum is $10,000
Post: Affordable is an interesting word – especially related to healthcare
Link to comment from December 18, 2025