This is international tax question. I am writing it in the form of a law-school type question but it is based on a real situation of someone I am trying to help, and I would appreciate any insights you could offer.
Situation:
There is a widower whose wife died in 2008. He is a U.S. citizen who has lived and worked in the EU for the last seven years.
In 2008, he had income from three sources:
1. His full-time job
2. An annuity pension from his late wife's employer. The employer witholds the tax from this pension at source. The government treats this pension as ordinary income.
3. A widower's pension from the government of the country in which he resides. The government does not withold tax on this, but his employer does in that his tax credits are reduced to reflect the amount of this pension. The government treats this pension as ordinary income.
He is late in filing his U.S. tax return for 2008 and is now trying to figure out how to do it correctly.
He plans to take the foreign earned income exclusion for the income from his job which is straightforward, but he is having trouble in figuring out exactly how to report the two pensions. He thinks he should take a "Foreign Tax Credit" however the instructions for the 1116 form and the IRS website do not appear to directly address the issue of foreign pensions.
Through internet research, he believes that the two pensions should be treated as "income re-sourced by treaty" on form 1116 but he isn't really sure. Pub. 575 does not seem to address this situation either.
Can someone please help?
Thank you.What is the name of your state (only U.S. law)?
Situation:
There is a widower whose wife died in 2008. He is a U.S. citizen who has lived and worked in the EU for the last seven years.
In 2008, he had income from three sources:
1. His full-time job
2. An annuity pension from his late wife's employer. The employer witholds the tax from this pension at source. The government treats this pension as ordinary income.
3. A widower's pension from the government of the country in which he resides. The government does not withold tax on this, but his employer does in that his tax credits are reduced to reflect the amount of this pension. The government treats this pension as ordinary income.
He is late in filing his U.S. tax return for 2008 and is now trying to figure out how to do it correctly.
He plans to take the foreign earned income exclusion for the income from his job which is straightforward, but he is having trouble in figuring out exactly how to report the two pensions. He thinks he should take a "Foreign Tax Credit" however the instructions for the 1116 form and the IRS website do not appear to directly address the issue of foreign pensions.
Through internet research, he believes that the two pensions should be treated as "income re-sourced by treaty" on form 1116 but he isn't really sure. Pub. 575 does not seem to address this situation either.
Can someone please help?
Thank you.What is the name of your state (only U.S. law)?