Purpose of Form

Who should file. File Form 1116 to claim the foreign tax credit if the election, earlier, doesn’t apply and:

• You are an individual, estate, or trust; and

• You paid or accrued certain foreign taxes to a foreign country or U.S. territory.

See Foreign Taxes Eligible for a Credit, later, to determine if the taxes you paid or accrued qualify for the credit.

Don’t use Form 1116 to figure a credit for taxes paid to the U.S. Virgin Islands. Instead, use Form 8689, Allocation of Individual Income Tax to the U.S. Virgin Islands.

eligible foreign taxes for the year, you can take a deduction for the following.

• Foreign taxes not allowed as a credit because of boycott provisions.

• Taxes paid to certain foreign countries for which a credit has been denied, as described in item 4 under Foreign Taxes Not Eligible for a Credit, later.

• Taxes on income or gain that aren’t creditable because you don’t meet the holding period requirement, as described in item 5 or 7 under Foreign Taxes Not Eligible for a Credit, later.

• Taxes on income or gain that aren’t creditable because you have to make related payments, as described in item 6 or 8 under Foreign Taxes Not Eligible for a Credit, later.

• Certain taxes paid or accrued to a foreign country in connection with the purchase or sale of oil or gas extracted in that country, as described in item 10 under Foreign Taxes Not Eligible for a Credit , later.

• Taxes on income or gain that aren’t creditable because they were paid or accrued in connection with a covered asset acquisition, as described in item 12 under Foreign Taxes Not Eligible for a Credit, later.

• If you are an accrual-basis taxpayer or if you elected to claim your foreign tax credit on an accrual basis, taxes paid that relate to a prior tax year in which you elected to claim a deduction instead of a credit in that prior year. See Regulations section 1.901-1(c)(3).

Nonresident aliens. If you are a nonresident alien, you generally can’t take the credit. However, you may be able to take the credit if:

• You were a resident of Puerto Rico during your entire tax year, or

• You pay or accrue tax to a foreign country or U.S. territory on income from foreign sources that is effectively connected with a trade or business in the United States. But if you must pay tax to a foreign country or U.S. territory on income from U.S. sources only because you are a citizen or a resident of that country or U.S. territory, don’t use that tax in figuring the amount of your credit.

See section 906 for more information on the foreign tax credit allowed to a nonresident alien individual.