401(K)/IRA Deductions in Candian Tax Return

[gandotra]

I have read various web articles on the subject issue and understand that many accountants do not advice people to add 401(K) Contribution to the Line 104 (Other Employment Income).

CRA Tax guide however instructs the Canadian Deemed Residents/Commuters to add 401(K) Contributuions to Line 104.

The article by Sebrinski Accounting Firms at web link http://www.serbinski.com/CdnInUS/Canadi ... r_2009.pdf had a description earlier under Table 2 for a Canadian Resident/Commuter who files a U.S. 1040 NR return upon which U.S. source employment income is required to add 401(K) Contributions to Line 104 on the Canadian return as per Article XVIII, para 7 of the old treaty.

This weblink article however does not discuss the position on a Canadian Citizen/US Person who has residences both in US (With permanent establishmnet in USA by virtue of Green Card being Processed) and Canada and files taxes based on W-2 income i.e. Form 1040 (for Federal Tax) along with State Tax and pays Property Taxes in USA and at the same time has been assigned Factual Resident status in Canada (by virtue of having Family and Property in Canada).

For CRA to charge taxes on 401(K) contributions for such Canadian Citizen/US Person - Would it not be violation under the clauses of Article XXV
on Non Discrimination under the old treaty?


I would also like you to revert on your following comments in this web forum and would like to know how to claim DNR status for described Canadian Citizen/US person who, already on submission of Form NR73, has been assigned Factual Resident of Canada:

"Until about 2003, having DL, OHIP, even library card and passport, was used in a points system toi determine tax residency. CRA (not me) felt that this betrayed INTENT (their word, their definition) to return to canada, and thus would deny a determination of non-residency, even for those clearly moving to US.

This practice is no longer followed however, and the notion (and the legal definition) of deemed non-resident (DNR) has become clearer. It applies solely to those who maintain substantial Cdn residential ties, much more that DL and OHIP, but who ALSO have the requisite ties in another treaty country, like US. It has gotten to the point that even those with spouses and houses in canada can be come deemed non-resident, and be treated axactly like a non-resident (departure return, deemed disposition, no more reporting of world income)."

I would like to thankyou for your invaluable insight and advice.

Thanks,