Capital gain occurred in 2010 (2009-2010 fiscal year of that country) in a foreign country. Tax will be paid in 2013 (with penalty and all, since it was due in 2010-2011).

Since he would owe heft amount in tax year 2010 (due to the foreign capital gain), he definitely does need a lot of the foreign credit for the year 2010. Since he actually didn't pay any tax in 2010, just that the tax liability occurred in 2010, it looks like he would have to use accrual method. But that means he can't use this huge foreign credit for any other years. Is that true? If yes, is there any way around this?

1 Answer 1


Form 1116 asks when the tax was paid or accrued. But to the best of my understanding you can only make that selection once, and all further forms 1116 must follow either the payment or accrual convention.

Do consult with a tax professional to get a proper tax advice, don't fill form 1116 without a professional advice if you're doing it for the first time. I'm not a professional and this is not a tax advice.

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