Canadian Small Corp Dividends

mtnman · Post by **mtnman** » Mon Dec 16, 2013 6:27 pm

Can Canadian dividends paid my a private corporation be classified as earned income for the US Earned Income Deduction ?

Thanks

nelsona · Post by **nelsona** » Tue Dec 17, 2013 10:39 am

Could you clarify exactly what you mean by "Earned Income deduction" as there is no program speicifcally called by that name.

mtnman · Post by **mtnman** » Tue Dec 17, 2013 2:56 pm

I am referring to the Foreign Earned Income Exlusion.

Thanks

nelsona · Post by **nelsona** » Tue Dec 17, 2013 3:08 pm

Dividends are generally not considered EARNED income, however if you a re a sole proprietor, business profits passed to you can be considered earned. salary froma corporation can only be considered eligible if it is reasonable for the amount of service you performed.

mtnman · Post by **mtnman** » Tue Dec 17, 2013 3:26 pm

I know salary and wages are considered earned. My question is whether dividends can be considered earned if they are reasonable and represent profits from the corporation.

Thanks

nelsona · Post by **nelsona** » Tue Dec 17, 2013 3:42 pm

Reread my answer, not all salary is eligible for the earned income exclusion, so saying you know that salary and wages are earned proves what?

I've given you the best answer I can. Others may be able to help you more. Otherwise, I would simply say that dividends are CATEGORICALLY unearned income, and thus ineligible. The corporation should pay you a salary.

Feel better?

JGCA · Post by **JGCA** » Fri Dec 20, 2013 7:20 pm

Dividends you receive from your CCPC and NOT AT ALL considered as earned income for teh foreingn earnerd income exclusion regardless if they were paid in lieu of salary or not. Just like for RRSP purposes earned income includes salary and any renumeration from office such as directors fees but not dividends.