[quote]This is a popular misconception.
In fact, there is no need for any connection between the foreign INCOME tax and the US tax, as clearly stated in the the criteria for an eligible foreign tax.(from Pub 514)
1. The tax must be imposed on you.
2. You must have paid or accrued the tax.
3. The tax must be the legal and actual foreign tax liability.
4. The tax must be an income tax (or a tax in lieu of an income tax).
[/quote]
Does that mean I can deduct my Canadian tax payments in 2007 due to reassessment of past years when I was not a US resident? I think it's unlikely. Just want to clarify.
foreign tax deduction
Moderator: Mark T Serbinski CA CPA
Thanks! But I asked IRS but the rep told me I can't because it's not taxable income in 2007. He said the FTC or FTD are meant to prevent double tax. Since I didn't pay US tax on that canadian income I cannot deduct it either.
It is a little different from RRSP collapse which you will pay Canadian tax on full amount but pay US tax on gain only. I paid Canadian tax in 2007 but that's based on income back in 2003.
The INS instructions clearly states that you can only claim foreign tax credit based on income when you are a US resident. But it doesn't say so for FTD.
Is there any other document support "there is no need for any connection between the foreign INCOME tax and the US tax"
It is a little different from RRSP collapse which you will pay Canadian tax on full amount but pay US tax on gain only. I paid Canadian tax in 2007 but that's based on income back in 2003.
The INS instructions clearly states that you can only claim foreign tax credit based on income when you are a US resident. But it doesn't say so for FTD.
Is there any other document support "there is no need for any connection between the foreign INCOME tax and the US tax"
Don't bother with IRS telephlunkies.
The foreign tax DEDUCTION is NOT meant to prevent double tax, no more than the deduction for state or local income tax does.
It's all in the foreign tax guide, just like you have found.
File it, and forget it.
The foreign tax DEDUCTION is NOT meant to prevent double tax, no more than the deduction for state or local income tax does.
It's all in the foreign tax guide, just like you have found.
File it, and forget it.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
If you really want to stand on leagl ground, then use the XXV clause of the treaty.
A US citizen in your situation (ie. recently moved back from canada) who had not used the FEIE the year before (which you did not) or the current year (which I trust you will not) would most certainly be allowed to claim any and all Cdn taxes paid in 2007 and owed for 2006 or 2007.
Thus by the treaty, so can you.
But you don't even need the treaty. Nowhere in Pub 514 does it say that you cannot take a deduction (or even a credit) for income tax from other years. Only income excluded by the Foreign Earned Income credit is excluded.
A US citizen in your situation (ie. recently moved back from canada) who had not used the FEIE the year before (which you did not) or the current year (which I trust you will not) would most certainly be allowed to claim any and all Cdn taxes paid in 2007 and owed for 2006 or 2007.
Thus by the treaty, so can you.
But you don't even need the treaty. Nowhere in Pub 514 does it say that you cannot take a deduction (or even a credit) for income tax from other years. Only income excluded by the Foreign Earned Income credit is excluded.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing