Split foreign income from distributions

Overview

Foreign income can be distributed from a trust (IR6), partnership (IR7), or look-through company (IR7) to an entity in TaxLab. However, the software does not support splitting foreign income at a segment level when it is distributed. 

If a distribution includes foreign income, adjustments may need to be made to the recipient’s workpapers to correctly record each segment. 

When only one segment of foreign income is received

If the distribution includes only one foreign income segment, you can edit the workpaper to specify the correct income type and jurisdiction.

1. In the navigation bar select Workpapers > Workpapers.
2. Under the Distribution heading, select the Foreign income workpaper. 
3. Enter the relevant Type of income and Jurisdiction.

When two or more segments of foreign income are received

If the distribution includes multiple foreign income segments, the original foreign income distribution workpaper will need to be reversed and separate foreign income workpapers added for each segment.

Step 1: Reverse the distribution workpaper

1. In the navigation bar, select Workpapers > Workpapers.
2. Select New workpaper.
3. Add a Foreign income workpaper to reverse the distributed amount. Complete the fields as follows:
   • Jurisdiction: Enter exactly as shown in the original distribution workpaper. Where possible, leave the original workpaper as XX – Unknown jurisdiction and match this in the reversing workpaper.
   • Type of income: Enter exactly as shown in the original distribution workpaper. Where possible, leave the original workpaper as Other and match this in the reversing workpaper.
   • Description for segmentation: Enter exactly as shown in the original distribution workpaper, if applicable.
   • Gross income: Enter the negative amount of income from the original distribution workpaper. Ignore the red warning outline.
   • Foreign tax paid: Enter the positive amount of foreign tax paid from the original distribution workpaper. Ignore the red warning outline.
   • Narration: Enter exactly as shown in the original distribution workpaper.

Step 2: Add foreign income workpapers for each segment

1. In the navigation bar, select Workpapers > Workpapers.
2. Select New workpaper.
3. Add a Foreign income workpaper for each segment of foreign income. Enter the correct jurisdiction, income type, gross income, foreign tax paid, and narration for each segment.

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