The TaxAct® calculation of Line 3e Gross income from all sources of Federal Form 1116 Foreign Tax Credit is not necessarily the same amount as reflected on Line 6 of Federal Form 1040 U.S. Individual Income Tax Return. This is because only gross amounts are taken into consideration (before subtracting losses and deductions).
For example, only gross receipts (less cost of goods sold) are taken from Schedule C (Form 1040) Profit or Loss From Business, only gross income is taken from Schedule E (Form 1040) Supplemental Income and Loss, and only capital gains are taken from Schedule D (Form 1040) Capital Gains and Losses (i.e. any loss transactions on Schedule D must be added back to the amount from Line 6).
Per IRS Instructions for Form 1116, on page 16:
Lines 3d and 3e
For lines 3d and 3e, gross income means the total of your gross receipts (reduced by cost of goods sold), total capital and ordinary gains (before subtracting any losses), and all other income (before subtracting any deductions).
To reconcile the amount on Line 3e of Form 1116 to the amount on Line 8 of Schedule 1 (Form 1040) Additional Income and Adjustments to Income in your return (if Line 4 of Schedule 1 (Form 1040) is a net capital LOSS):
To reconcile the amount on Line 3e of Form 1116 to the amount on Line 8 of Schedule 1 (Form 1040) in your return (if Line 4 of Schedule 1 (Form 1040) is a net capital GAIN):
Note. While the IRS does not more specifically define the calculation of "gross income from all sources", for Line 3e Federal Form 1116, we have calculated this amount in the same manner for many years without any problems resulting with that calculation. We are confident in that calculation; however, you can verify that with the IRS by contacting them at (800) 829-1040.
Note. The calculation for Line 3d Gross Foreign Source Income is calculated in a similar manner (except only looking at the foreign amounts).
Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.