Splitting foreign income received from a Trust, Partnership or LTC

Currently TaxLab is unable to track distributions of foreign income at a segment level. Therefore, if more than one type or jurisdiction of foreign income has been received from a distribution, adjustments need to be made in the IR3 entity to split the foreign income accordingly.

One segment of foreign income received from an IR6 or IR7

1. Go to Workpapers > Workpapers
2. Open the foreign income workpaper in the Distribution workpapers
3. Select the relevant Income type and Jurisdiction.

Two or more segments of foreign income received from an IR6 or IR7

In order to include this level of detail in the IR3, you will need to complete the following steps:

1. In Workpapers > Workpapers, add a foreign income workpaper that will have the effect of reversing out the overseas income that was automatically brought through from the distribution.
   • You will need to set the following in the workpaper:
     • Jurisdiction – exactly the same as the distribution workpaper. Where possible, leave the distribution workpaper as Unknown jurisdiction and set the new workpaper as the same.
     • Type of income – exactly the same as the distribution workpaper. Where possible, leave the distribution workpaper as Other and set the new workpaper as the same.
     • Description for segmentation – exactly the same as the distribution workpaper
     • Gross income – the negative amount of income that is in the distribution workpaper (ignore the red warning outline that will appear around the field, this only indicates that a value has been entered with an unexpected sign)
     • Foreign tax paid – the positive amount of foreign tax paid that is in the distribution workpaper (ignore the red warning outline that will appear around the field)
     • Narration – exactly the same as the distribution workpaper

   • The overall effect is that this workpaper combined with the workpaper created at the distribution net out to nil. It is important to note that any deviation from these settings will result in unexpected outcomes on your Tax Position and your Foreign Tax Credit calculation due to the workpapers having a differing segment or not netting out to nil.

     
     
2. In Workpapers > Workpapers add foreign income workpapers for each segment of foreign income as required to declare the foreign income and tax credits received from the distribution. 

If the distribution from the trust is updated and the foreign income distribution changes, you will need to update the reversing workpaper (added in step 1 above) and the foreign income workpapers.