FTC 1116 - Income resourced by treaty

jenfin · Post by **jenfin** » Fri Aug 10, 2012 8:41 pm

Apparently there was legislation in August 2010 relating to preparing 1116s re: certain income resourced by treaty.

OAS/CPP --for 2010 I reported this on line 20a Soc. Sec benefits and reported the taxable amount as zero. I excluded a prorata amount of my Canadian taxes when determining my FTC .I also prepared an 8833 to take the treaty provision.

If I am now required to prepare a 1116 for this income to report "income resourced by treaty" when summarizing my 1116s in Part !V my total FTC will be too big unless I report the OAS/Cpp as taxable income on 20 b. Is this how I should handle it....or does the new regulation not apply to social benefits.

US capital gains/losses on stock - I guess there is a similar issue re: taking a treaty position to treat these as Canadian. Maybe it is just as well not to take the treaty position???

Any feedback would be appreciated.

Regards

nelsona · Post by **nelsona** » Sat Aug 11, 2012 1:35 pm

Nothing new here. Re-sourcing by treaty has been around for decades.

You did not say if you live in US or canada. If you live in US OAS/CPP are NOT taxed in canada at all-- they are taxable in US. There would be no need to re-source since you should not have paid any US tax. Vice versa if you live in canada with regard to Socail security. Again no need to re-source because you excluded the income on your 1040 line 20.

So it sounds like you are a little mixed-up on this issue (understandably)

Cap gains are treated much the same way, taxable only hwre you live.

So, where do you live? We'll start there.

jenfin · Post by **jenfin** » Sun Aug 12, 2012 8:32 am

Thank you. Dual citizen, resident in Canada.

nelsona · Post by **nelsona** » Mon Aug 13, 2012 5:08 pm

So, SS, CPP, OAS, are all reported on 20, and excluded, as you did, with a 8833 sattement. No 1116 needed.

Since you are in canada, any cap gains are Cdn-sourced, so you merely report the cap gains are you would ordinarily on your 1040 (in US dollars), and on a 1116 passive income, and take the Cdn tax you paid on those gains are your basis for credit. You have no US-sourced cap gains that need to be re-sourced.