Questions about re-sourcing non-reporting fund income

Hello everyone,
I've been putting off my US taxes and now need to file ahead of the extension deadline this month.
US/UK citizen residing in the UK, and pay in the UK on the arising basis.

I used to have a lot of non-reporting mutual funds and sold them all before April 2016, and thus have already reported and paid tax on the income and gains in the UK.
I understand that, from the UK's perspective, non-reporting funds mean all gains and dividends are treated as regular income.
I'm filling out 1116 forms for the FTC, and marking income as re-sourced by treaty.

A) I assume it's correct that all of my "capital gains" from disposal of these funds should be re-sourced to the UK, as UK has first right of taxation...?

BUT
B) What about dividend income? Because the UK taxes at full rate (because non-reporting), do I re-source 100% of that to the UK? Or does the US still get it's first priority on 15% taxation, which means I should do the complex calculation per page 104 of the treaty instructions [nofollow] ? And then revise my 2015/16 self assessment to get a credit for that 15% tax paid to the US?
It's about $500 of income, if that matters.

Finally, if I'm doing the above, I definitely need to file an 8833, right?

Thanks a lot!

You can always file an extension to 15 December while you research and read further. 

For UK purposes you will have used spot exchange rates on each date of purchase & sale; and the UK will not have given you relief for losses when expressed in Sterling.  This means that you can only resource those specific gains that were actually doubly taxed.

For dividends you sound on the right track with the 15% due to the IRS...

Thanks Guya. That's actually a good idea about the December extension, I didn't realise that was available.

I did do the above when figuring out the UK taxes, but didn't think about the losses for this purpose. I think there were 3 fund sales I lost money on in GBP, which are also negative in USD. Which sounds to me like that would imply re-sourcing more than my total net gains, because I'd no longer be subtracting the losses?
I'm starting to think this is above my head and I'm best off just hiring a professional!

Thanks Guya. That's actually a good idea about the December extension, I didn't realise that was available.

I did do the above when figuring out the UK taxes, but didn't think about the losses for this purpose. I think there were 3 fund sales I lost money on in GBP, which are also negative in USD. Which sounds to me like that would imply re-sourcing more than my total net gains, because I'd no longer be subtracting the losses?
I'm starting to think this is above my head and I'm best off just hiring a professional!

Parliament decided back in 1984 that you could not have relief for the losses; so you would not have had relief in the UK for the losses.  The gains and losses are probably still very different because of currency fluctuations.

I would summarise the points as follows-
•   The rules for dividends, both the 15% US credit rules and the special UK rates on dividend income, apply only to the distributions from the funds, and not to any OIGs charged as income in the UK.  These US distributions can then be resourced to the US, as provided under the treaty.
•   The UK taxes only gains on non-reporting funds as income; losses remain capital losses. These gains should be resourced to the US and credit claimed; it does not matter that the UK tax is income tax rather than capital gains tax.

I would summarise the points as follows-
•   The rules for dividends, both the 15% US credit rules and the special UK rates on dividend income, apply only to the distributions from the funds, and not to any OIGs charged as income in the UK.  These US distributions can then be resourced to the US, as provided under the treaty.
•   The UK taxes only gains on non-reporting funds as income; losses remain capital losses. These gains should be resourced to the US and credit claimed; it does not matter that the UK tax is income tax rather than capital gains tax.

However, what happened in 2016 frequently were losses in dollars but gains in pounds,  so no capacity to resource as their was no doubly taxed gain.

Guya well observed comment raises an interesting question about the operation of these rules.

Let us say that
- there was a disposal one which gave rise to a gain in sterling but loss in dollar terms. The UK would tax the sterling gain; there would be no US tax.
-say there was a disposal two where there were gains in both sterling and dollar terms. There would then be tax in both the UK and the US, before considering resourcing.

The issue is whether it would be possible under the resourcing rules to obtain US tax relief for both disposal one and disposal two.

Could anyone offer a technical analysis of this?

- there was a disposal one which gave rise to a gain in sterling but loss in dollar terms. The UK would tax the sterling gain; there would be no US tax.
-say there was a disposal two where there were gains in both sterling and dollar terms. There would then be tax in both the UK and the US, before considering resourcing.

Sorry dropped off once I decided to seek professional advice! Disposal One above is a situation I had a few times, particularly from buying when it was $2.00+ to the £ and selling when it was $1.50. I'd ideally like to get a tax credit for the taxes I paid, but then can I claim a capital loss in the US? So confusing. 

If there is a Disposal One type of sale, with a UK gain on which UK tax is paid, but a US loss where there is no US tax, then it would appear unlikely that there will be any form of relief in the US for the UK. The resourcing rule (in Article 24, paragraph 6 (d) only applies “to the extent” that resourcing is needed. This would suggest that there would be no resourcing and no relief.

But perhaps the US allows the UK tax as an expense, increasing the loss in the US?

It would be good if MikeUK were to share a summary of any points clarified from his professional advice.