What am I doing wrong on my return?

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speer1234
Posts: 10
Joined: Thu Mar 21, 2019 6:10 pm

What am I doing wrong on my return?

Post by speer1234 » Tue Mar 26, 2019 4:51 pm

I earned (all figures in USD):

US source interest income (Bank bonus, not taxed in Canada): $1349.81

Canadian source interest income: $2133.04 (only $1876.10 was taxable by Canada)

Net interest income: $3482.85

The $1349.81 of US source interest income is taxable by the US. My US tax liability is $9728. After calculating the FTC's my US tax liability is $0. I should owe tax on this $1349.81 US source income so I am doing something wrong. Im going over the numbers again and cant figure out what I did wrong.

Anyone care to look over my numbers and give their opinion?

screenshots: https://imgur.com/a/5t7dE9F

speer1234
Posts: 10
Joined: Thu Mar 21, 2019 6:10 pm

Re: What am I doing wrong on my return?

Post by speer1234 » Wed Mar 27, 2019 3:27 am

The foreign tax credit cannot be more than my total U.S.tax multiplied by the fraction of taxable income from foreign sources. Since I have some U.S. income, it's not possible for the foreign tax credit alone to reduce your total tax to zero.

Cant figure out what I did wrong.

nelsona
Posts: 15980
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: What am I doing wrong on my return?

Post by nelsona » Wed Mar 27, 2019 5:12 am

Are you using software? If not, then all bets are off
By the way, not sure why you say your US bank interest is not taxable in Canada. and why Cdn interest would not be taxable in Canada.
Did you move or something. You should indicate this on your post.

The Cdn bank interest goes on a passive 1116 along with your cap gains.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

speer1234
Posts: 10
Joined: Thu Mar 21, 2019 6:10 pm

Re: What am I doing wrong on my return?

Post by speer1234 » Wed Mar 27, 2019 1:57 pm

The interest I earned in the US are from bank bonuses. Canada does not tax bank bonuses.

$256.94 of the interest I earned in Canada is not taxable by Canada because it was earned in a TFSA.

I do not use software. I did not move, I still live in Canada but sometimes frequent the states and when I do I have a hobby of churning "bank bonuses".

I talked to someone and about what I did wrong on the return and their response was:

"I think I've got it: you're reducing your U.S. taxable income with a capital loss, but not apportioning this as a deduction to your foreign income used for the credit. Each Form 1116 uses only the standard deduction, making the calculated fraction of foreign versus U.S. income too high."

nelsona
Posts: 15980
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: What am I doing wrong on my return?

Post by nelsona » Wed Mar 27, 2019 2:26 pm

Ok. Software would have caught this.
Remember that none of the US tax is eligible for any foreign tax credit on your Cdn return, by treaty.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

speer1234
Posts: 10
Joined: Thu Mar 21, 2019 6:10 pm

Re: What am I doing wrong on my return?

Post by speer1234 » Wed Mar 27, 2019 3:02 pm

Understood.

To solve the incorrect Form 1116 calculations, Should I include the "2479" capital loss on line 3b on each of my Form 1116's?

Pictures: https://i.imgur.com/xRVVP2xg.jpg and https://i.imgur.com/szIqm8Z.jpg

nelsona
Posts: 15980
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: What am I doing wrong on my return?

Post by nelsona » Wed Mar 27, 2019 3:13 pm

No, it should go on line 5 of your passive 1116. it is a loss that is definitely related to passive income. Line 3 is for non-related expenses, which get prorated (the form even says so).
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

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