Serbinski Accounting Firms

On form 1116 (Foreign Tax Credit), how are expenses, losses and other deductions that are not definitely related to one category of income apportioned between all categories of income? Publication 514 (page 13) says: “… they are apportioned under the principles of the foreign law. If the foreign law...

I'm just saying that I agree with you that 39.6% is the tax rate that determines whether HTKO applies. That's what the tax code says, as far as I can tell.

I dug into this deeper. About the applicable tax rate to determine if a HTKO applies, I think I know why it is 39.6%, and not something else such as 20% for long-term capital gains. Section 1.904-4(c)(1) of the U.S. tax regulations states: “Income is considered to be high-taxed income if, after allo...

As far as I can tell even if the HTKO moves a “passive category income” item to “general category income” it doesn't change the tax calculation on the U.S. return. It just means that the foreign tax credits associated with that income are moved from the passive category to the general category. Corr...

I am trying to determine my U.S. tax liability for 2020 if I sell shares of an ETF and incur a large long-term capital gain this year. I'm doing this on a spreadsheet since I don't have any software. My effective Canadian tax rate might be over 20% which is the maximum tax rate on long-term capital ...

Do you have a source that states this?

I have found different opinions on the internet. For long-term cap gains some say it should be 20% not 39.6%.

When claiming a foreign tax credit for capital gains on form 1116, should I compare the effective tax rate that I pay on these gains in Canada against the maximum tax rate in the U.S. for short-term capital gains or long-term capital gains to determine if a "High Tax Kick Out" applies?

nelsona wrote:
> No, it is both.

I'll take your word for it. I suppose it is a loop-hole in the laws then, because I would be deducting US tax that I am actually not paying.

nelsona wrote: > If your US taxrate is more than 15% before you do FC, you can use the extra > -- for the dividends only -- as a deduction (most software can handle > this). Really your dividends are probably the only income that qualifies > for Cdn FTC. I'm thinking that if I claim a special 1116 (...

I'm still not clear on how to calculate the tax rate on the US dividends. Income Tax Folio S5-F2-C1, Foreign Tax Credit says to use "gross income", not "adjusted gross income" as I mentioned previously (section 1.22): https://www.canada.ca/en/revenue-agency/services/tax/technical...

Thanks for the reply. It sounds complicated. > For US dividends, you can only claim 15% of any US tax as a credit on your > Cdn return. (any extra can be taken as a deduction in Canada) According to the web page for the ETF the break-down of the distributions is categorized entirely as "Ordinar...

I am a dual national (Canadian/U.S. citizen) resident in Canada. I own shares in a U.S. domiciled ETF, which is held in a Canadian brokerage account. No U.S. tax has been withheld from the ETF distributions because I am a U.S. citizen. I have some questions about how to claim a foreign tax credit on...