FORM 1116 Foreign Tax Credit and Rev Proc 10-19

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mm77mm77
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Joined: Fri May 15, 2020 11:42 am

FORM 1116 Foreign Tax Credit and Rev Proc 10-19

Post by mm77mm77 » Sat Oct 10, 2020 8:42 pm

1) Just wanted to confirm, that if I used tuition credit amounts and previous capital losses to offset deemed disposition tax on my 2019 CDN emigrant departure return then that means that I cannot use Form 1116 to claim any foreign tax on my 2019 1040 US Return? I paid $0 actual tax out of my pocket. As far as I understood, I cannot use the tuition credit/capital losses amounts for the purposes of a FTC, correct?
I did not have any wages or any other income that year.

2) I will be filing Rev Proc 10-19 to step up my cost basis for the US capital gains.
It seems to me that I have to mail to IRS form 8833 with form T1243 separately of my e-file 1040, since 8833 is not included in Turbotax?? Is this OK? Or do I have to mail both 1040 and 8833 because of this?

Thank you

mm77mm77
Posts: 20
Joined: Fri May 15, 2020 11:42 am

Re: FORM 1116 Foreign Tax Credit and Rev Proc 10-19

Post by mm77mm77 » Sun Oct 11, 2020 2:59 am

3) Capital Gains Question - I became US resident on Jan 1st 2019 and I sold a stock on Dec 30th 2019.
I am using my deemed disposition step-up ACB as of Jan 1st 2019 (Rev Proc 10-19)
I bought this stock 5 years ago, so I believe it should be long-term capital gain, correct?
Therefore, I can just use original purchase date and the step-up ACB on Schedule D?

4) Can I use step-up ACB for California 540 too?

Thank you!

nelsona
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Re: FORM 1116 Foreign Tax Credit and Rev Proc 10-19

Post by nelsona » Tue Oct 13, 2020 6:12 pm

1. Correct. You can't claim FTC on your US return -- before you take FTC on your CDn return -- you owe no CDn taxes. It is a problem with how tuition credits must be taken first and affect many Cdn graduates who work in US
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

nelsona
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Re: FORM 1116 Foreign Tax Credit and Rev Proc 10-19

Post by nelsona » Tue Oct 13, 2020 6:15 pm

2. You can mail the 8833 itself, but make it an amendment to your return using 1040-X.
3. Yes, the step-up because of deemed disposition doesn't change the actual acquisition date.
4. That I do not know, i avoid looking too deeply in state taxes.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

mm77mm77
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Joined: Fri May 15, 2020 11:42 am

Re: FORM 1116 Foreign Tax Credit and Rev Proc 10-19

Post by mm77mm77 » Wed Oct 14, 2020 5:24 pm

Thank you for your reply.

I have a couple questions In regards to filling out form 8833:

Line 2: List the Internal Revenue Code provisions overruled...
Is it IRC 61? Or can I just leave it blank

Line 6: I just copied the verbiage from Rev Proc 10-19. Is this sufficient or do I need provide more details?

"For U.S. federal income tax purposes I am electing pursuant to new Article XIII(7) to take an adjusted basis in the property equal to its fair market value as of the date of the deemed disposition under Canada’s deemed disposition rules.
I am attaching Form T1243 "Deemed Disposition of Property by an Emigrant of Canada"

mm77mm77
Posts: 20
Joined: Fri May 15, 2020 11:42 am

Re: FORM 1116 Foreign Tax Credit and Rev Proc 10-19

Post by mm77mm77 » Wed Oct 14, 2020 5:43 pm

And another question if I may.... regarding Form 8938

1. Do RRSPs and TFSAs go in Part I (Foreign Deposit and Custodial Accounts) or Part II (Other Foreign Assets)?
I put them in Part I because they are "accounts" but I've seen others put them in Part II. Not sure which is the correct way.

2. Also, if they do go in Part II, on line 8b do I check Trust or Corporation?
I'm worried if I check trust that they might come back saying I need to file Form 3520 (even though RRSPs are exempt)...

3. I also put a Defined Benefit Pension Plan in Part II. Also, not sure if I should check Corporation or Trust?

Thanks again!

nelsona
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Re: FORM 1116 Foreign Tax Credit and Rev Proc 10-19

Post by nelsona » Wed Oct 14, 2020 6:00 pm

Your information for 8833 is correct.
Someone else will have to answer your FATCA questions. Don't forget FBAR.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

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