Excess Canada FTC from Foreign Principal Residence Sale
Moderator: Mark T Serbinski CA CPA
Re: Excess Canada FTC from Foreign Principal Residence Sale
As the IT explains, the time when taxes are paid or withheld is not the deciding factor, it is the tax YEAR in which they are accrued. CRA ALWAYS uses the accrual method for foreign tax credit/deduction.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
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Re: Excess Canada FTC from Foreign Principal Residence Sale
Thank you for the information! So unlike the IRS no choice between the accrual and cash methods.
Re: Excess Canada FTC from Foreign Principal Residence Sale
No.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
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Re: Excess Canada FTC from Foreign Principal Residence Sale
nelsona wrote:
> You won;t instantly be non-resident, so you may be able to sell a few weeks
> after leaving US.
Do you mean one can be considered tax resident of both Canada and the US at the time of sale, so the FIRPTA withholding is not required in the US and the 20(12) deduction is available in Canada during this overlapping time? In this case, the deemed acquisition date for Canadian purposes would still be the date one becomes resident of Canada and not the date one becomes non-resident of the US?
> You won;t instantly be non-resident, so you may be able to sell a few weeks
> after leaving US.
Do you mean one can be considered tax resident of both Canada and the US at the time of sale, so the FIRPTA withholding is not required in the US and the 20(12) deduction is available in Canada during this overlapping time? In this case, the deemed acquisition date for Canadian purposes would still be the date one becomes resident of Canada and not the date one becomes non-resident of the US?
Re: Excess Canada FTC from Foreign Principal Residence Sale
In Canada, It is ALWAYS the tax year the the income arises. If you sell the house in 2021, it must be used on your 2021 Cn return, whether it is paid in 2021 or 2022, or any other future year. That is the meaning of accrued tax: The tax that is determined on your 2021 US return, or, if not filing the final tax that was withheld.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Re: Excess Canada FTC from Foreign Principal Residence Sale
You do realize that whatever your FIRTA withholding, you MUST file a US tax return for that year to determine the correct tax, which is the only tax amount that CRA will accept.
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Re: Excess Canada FTC from Foreign Principal Residence Sale
Understood. Just wanted to avoid having to deal with the hassles of FIRPTA withholding and potentially not having access to the withheld proceeds for months.
If I am a Canadian tax resident, I would be able to claim the 20(12) deduction on the sale. If I am not a US foreign person, I would not be subject to FIRPTA withholding on the sale. If I am dual-resident at the time of sale, I should be able to claim the deduction in Canada without being subject to FIRPTA withholding in the US?
Actually, reading 20(12) again, it seems like the deduction may be available even if the taxpayer is not a Canadian tax resident at the time of sale:
>> In computing the income of a taxpayer who is *resident in Canada at any time* in a taxation year from a business or property for the year, there may be deducted any amount that the taxpayer claims that does not exceed the non-business income tax paid by the taxpayer for the year to the government of a country other than Canada [...]
As long as the taxpayer becomes resident in Canada before the end of the taxation year (calendar year for individuals). Did I misinterpret the paragraph?
If I am a Canadian tax resident, I would be able to claim the 20(12) deduction on the sale. If I am not a US foreign person, I would not be subject to FIRPTA withholding on the sale. If I am dual-resident at the time of sale, I should be able to claim the deduction in Canada without being subject to FIRPTA withholding in the US?
Actually, reading 20(12) again, it seems like the deduction may be available even if the taxpayer is not a Canadian tax resident at the time of sale:
>> In computing the income of a taxpayer who is *resident in Canada at any time* in a taxation year from a business or property for the year, there may be deducted any amount that the taxpayer claims that does not exceed the non-business income tax paid by the taxpayer for the year to the government of a country other than Canada [...]
As long as the taxpayer becomes resident in Canada before the end of the taxation year (calendar year for individuals). Did I misinterpret the paragraph?
Re: Excess Canada FTC from Foreign Principal Residence Sale
At this point, all I'll say is that whatever you try to do under 20(12) will be questioned by CRA. That will be the time to make your case.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing