Questions about the form 1116

[sergey]

We moved to US from Canada in 2006. We want to make "full year residence" election in US tax return.

I have the following questions about the form 1116:

1) For T5s income (i.e. before I moved to US), is the tax paid or accrued ? I counted this income in my Canadian tax return, i.e. I am going to pay it now.
Can you explain the difference between "paid" and "accrued" ?

2) How do I calculate the T5s tax I paid (ok, going to pay) to Canada ? I know my total Canadian income (T4+ T5s) and the total tax. Which part of the total tax belongs to T5s ? Note that I excluded my T4 income from US tax return by the form 2555

[nelsona]

Tax paid would be the withheld tax actually paid in 2006. Accrued is the tax owed for the year (wht you come up with on your tax return). It is simplest to use the accrued method,

You apportion the tax proportionally to the income.

If you made 11K of income, 1K of which was from T5, then 1/11th of your Cdn tax bill is creditable on 1116. Since you excluded your wages, you cannot include CPP/EI as tax.

[sergey]

Thank you, Nelson. I have more questions

1) What is the date taxes related to T5 accrued ? December 31, 2006 ?
2) I want to double check that I understood you example correctly:
11K - line 150 in T1
1K - line 121 in T1
Total tax - line 435 in T1 (includes both federal and provincial taxes)

So my T5 taxes are = line 435 * line 121 / line 150 . Is this correct ?

3) Line 3d in 1116 - do I include my foreign earned income I excluded by 2555 ? The instructions are not clear. I believe I do not, because it is a different category ( not passive income).

[nelsona]

1. I would choose the accrual date as the last date that the income was paid to you in 2006.

2. looks right.

3. you would only include your passive income. All The wages have been used in 2555 so can't be used on 1116.