foreign tax refunded after credit taken in 2014

[schirallicpa]

UGH!

The closer we get to the 15th, the more complicated the returns get.  

This guy sold land in Canada in late 2014 and the lawyers in Canada assessed an estimate of the tax.  And of course it was over-estimated.  And in 2015 they refunded him a portion of the tax.  But on the 2014 return (previous tax preparer) took all of the tax as foreign tax credit.  20/20 hindsight, the guy should have put 2014 return on extension and waited for everything to clear.  

So now - do I add back the credit taken last year on the 2015 return (like we do with farmers when the get school tax refund, or fuel tax refund), or do i need to amend the 2014 return.

[jklcpa]

You have to amend the 2014 return.  See the 2nd paragraph of this IRS page:

Amending Your Return to Claim the Tax Credit

If you claimed an itemized deduction for a given year for qualified foreign taxes, you can choose instead to claim a foreign tax credit that will result in a refund for that year by filing an amended return on Form 1040X (PDF) within 10 years from the original due date of your return. The 10-year period also applies to calculation corrections of your previously claimed foreign tax credit.

If the foreign income taxes you claimed as a credit are refunded or otherwise reduced, you must file an amended return on Form 1040X reporting the reduced foreign tax credit. There is no time limit on this requirement.

[schirallicpa]

you're awesome!  thank you.

[schirallicpa]

but now I have to ask another question - 

The exchange rate has changed.  How do I handle that difference in the amendment, or do I?

 

[jklcpa]

1 hour ago, schirallicpa said:

but now I have to ask another question - 

The exchange rate has changed.  How do I handle that difference in the amendment, or do I?

 

 

I'm not *that* awesome; Google is a good friend.

Pub 514 covers the exchange rate problem. From the contents, select the link to "Foreign Currency Exchange Rates" and read that and the section that follows entitled "Foreign Tax Redetermination".

[schirallicpa]

3 hours ago, jklcpa said:

 

I'm not *that* awesome; Google is a good friend.

Pub 514 covers the exchange rate problem. From the contents, select the link to "Foreign Currency Exchange Rates" and read that and the section that follows entitled "Foreign Tax Redetermination".

Yes you are awesome!

[jklcpa]