Non-Resident Unused Tuition Carryforward

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

Moderator: Mark T Serbinski CA CPA

Post Reply
SM
Posts: 94
Joined: Fri Mar 20, 2015 3:43 pm

Non-Resident Unused Tuition Carryforward

Post by SM »

Canadian citizen departed Canada a few years ago and kept a rental property in Canada. Compliant with 25% withholding, S.216, etc. Sold property in 2014 and went through the proper certificate of compliance procedures T2062, T2062A, etc. Have capital gain to pay for sale on T1 non-resident return. Have unused tuition carryforward amoutns on file with CRA from before I departed Canada. Can I use the federal amounts to offset the gain? I realize I won't be able to use the provincial amounts as I will have to pay 48% non-resident surtax and no provincial tax.

Non-resident guide says complete Schedule B. If the result from line A is less than 90% Your allowable amount of federal non-refundable tax credits is 15% of the total of the amounts on lines 308, 312, 316, 317, 319, and 323 (other than the education and textbook amounts) plus the amount on line 349 of your Schedule 1. The carryforward amount from S11 shows up on line 323 however my software is not letting me use it (Intuit Profile).

If it can be used, how do you know what portion is education and textbook amounts; these are from previous years?

Read the non-resident guide further and it says the following: "If you were a student, you can claim the tuition fees paid to an educational institution inside or outside Canada that provided courses at the post-secondary level you took in 2014, plus any unused part of your tuition amount carried forward from a previous year.

Was not a student in the current year, so not sure if this applies. I even created a fake T2202A to show tuition from the current year and it let me use the tuition fees (not education amounts - which I researched and is correct), but it still does not let me claim the federal tuition from previous years.

Anyone know if federal tuition carryforward can be used?
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

Since there really is no way, unless they have all your previous scedule 11's, for intuit to know what portion of your carry forward was tuition, i suspect that they are only putting scedule 11 line 320 as your allowable portion on schedule B.

I don't think the wording in the guide for line 323 about 2014 is the problem, since the same wording appears in the resident guide.

I just think Intuit can't come up with the real number for that entry so uses the only one it has: this year's tuition amount.
Of course, were you a resident, there would never be a need to parse out the 3 amounts when carrying forwrd, so we are talking about an unusual situation.

I would contact Intuit. you may have to override line 53 on scedule 1.
You might want to try ufile to see if that does it the ame way.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
SM
Posts: 94
Joined: Fri Mar 20, 2015 3:43 pm

Post by SM »

Thanks Nelsona. I tried Ufile and it pulled in the federal carryforward tuition no problem; no warnings or anything. On the Profile software I also tried random other amounts for line items 316 (disability amount) and line 319 (student loan interest). It pulled those numbers in, multiplied them by the required 15% and they correctly showed up on line 53. I even tried student loan interest from a previous year and that was calculated correctly.

As you suggested, perhaps the software can’t determine this amount because it doesn’t have the complete S11 history. This must be the case because it was actually reducing my unused carryforward tuition amount on line 25 of S11 by the exact amount that was needed to reduce my federal tax to zero. It just wasn’t being pulled in on line 37 or 53 of the schedule 1. In other words, I would have lost this amount of unused tuition carryforward even know I didn’t use it. I know you are forced to use it if you have foreign tax credits, but that’s not the case here.

Not worried about splitting the amounts between tuition, education amounts and textbook amounts too much. There is over $50K of federal tuition carry forward and the capital gain is only about $15K. I'm sure there is at least $15K of actual tuition included in the $50K.

I can override the system no problem to include it on line 53, I just wanted to make sure I could use it. I was a bit confused after reading the non-resident guide. So as far as you know, I should be able to use it?
SM
Posts: 94
Joined: Fri Mar 20, 2015 3:43 pm

Post by SM »

This won't be applicable in this situation, but there may be a problem splitting your unused carryforward amount between tuition, the education amount and textbook amount. These three amounts are all lumped together on the S11's from previous years and used together; any remaining amount is carried forward. How would we ever know what portion is left over? I suppose you could use LIFO, FIFO or proportionate method to figure this out, but which is correct? It’s easy to figure out if you only have tuition for the current year, but becomes a bit more challenging if you are trying to figure this out from previous years.
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

That's where record keeping is needed.

As I said, this is the only situation where one needs to differentiate. Even most other non-residents would typically use the normal return for their province of 'business".

So go with ufile. Its typically a better product anyways.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
SM
Posts: 94
Joined: Fri Mar 20, 2015 3:43 pm

Post by SM »

Ok thanks again! I will just use Ufile.

Yeah I suppose one of the few times this would even come into play is when you sell taxable Canadian property. Otherwise if you have primarily Canadian source income from say employment (commuting, etc), chances are the result from line A of schedule B will bee more than 90% and you can claim all credits, no questions asked (including the provincial tuition carryforward amounts).
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

The reason it would not come into play is that if your income was from wages or business, you would use the provincial forms, and not bother with sched A and B.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
SM
Posts: 94
Joined: Fri Mar 20, 2015 3:43 pm

Post by SM »

I'm confused by your last statement. Would you not always need to complete schedule A and B if you are a non-resident?

Yes I agree that if your only income is wages or business income from a permanent establishment you would pay tax provincially and not use the 48% surtax.

If you had both income from employment and taxable capital property you would pay tax on the employment income provincially and tax on the capital property with the 48% surtax. In this case you would need to complete the multiple jurisdictions form to prorate the amounts between provincial and 48% surtax and tax them accordingly.

However, in all of these cases, form A and B is still required is it not? Aren’t these forms strictly required to calculate what credits you can claim; regardless if you are paying tax provincially or federally with 48% surtax?
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

Read the introductory portion of the NR guide. It explains that there are several situations where the NR return is not the correct one for a non-resident, depending on the type of Cdn income you are earning.

Not something you need to concern yourself with, you will never file an NR return again, and the software will take care of this decision.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
SM
Posts: 94
Joined: Fri Mar 20, 2015 3:43 pm

Post by SM »

You’re right it would probably never apply; but was curious none the less. I’m just trying to learn. Thought this might be valuable information for anyone else reading this post.

I assume you are referring to the following “If you are reporting only income from employment in Canada, from a business or partnership with a permanent establishment in Canada, use the General Income Tax and Benefit Guide and related forms book for the province or territory where you earned the income. The forms book includes the return you will needâ€￾.

However, later on in the guide it seems very specific that Schedule A & B are still required, even if you only have employment or business income.

The software asks if you are resident or non-resident and as soon as you click non-resident, it makes you complete Schedule A & B. If you use the province of employment as say Ontario and select non-resident, it taxes you correctly in Ontario instead of the 48% surtax, but still makes you complete schedule A & B. It denies your basic personal exemption, etc unless 90% or more of your worldwide income is from Canada.
Jjon
Posts: 6
Joined: Mon Apr 20, 2015 10:03 pm

Post by Jjon »

if you are a non-resident of Canada and your income is Canadian employment income (for example a cross border commuter from the US) then you file the provincial tax package but you need to complete schedules A and B to see if you are over the 90% threshold and thus eligible for the non refundable tax credits
SM
Posts: 94
Joined: Fri Mar 20, 2015 3:43 pm

Post by SM »

That seems consistent with what my software is prompting me to do Jjon. Thanks for all the help Nelsona and Jjon!
Cando28
Posts: 10
Joined: Mon Mar 09, 2015 11:44 pm

Post by Cando28 »

My apologies, as my question might seem very dull. My first Departure return- trying to learn here and scratching my head :)

When filling Schedule A for T1234, should I be only calculating my "income from sources outside Canada" as income while/until I was resident in Canada? or account for rest of the year too?

Since, I do provide my departure date on T1, my thought process that I need to only provide numbers while I was a resident. I only had one job source while in Canada and no other income sources so my Line 6 or Line 13 on Schedule A = zero. ?
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

Please do not hijack threads.
Ask your own question on your own thread please.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Cando28
Posts: 10
Joined: Mon Mar 09, 2015 11:44 pm

Post by Cando28 »

Sorry about that Nelsona.
My intention was to post in an already valid discussion of same topic. I will create a new thread. :)
Post Reply