Avoiding double taxation on US-based ETFs held in CDN acct

[carlo]

I'm a dual citizen resident in Canada. I own ETFs purchased on the NYSE through a Canadian brokerage. They send me both Canadian and US (1099) tax forms each year for dividend income earned. I am confused as to which country I owe tax to on this income.

Since these are US-based ETFs (although held in a Canadian account) and I receive 1099 forms for them, I think the US must treat them as US-based income. So I am not sure that I can include them in my passive income for the foreign tax credit calculation, and then I'd wind up owing US tax on them. (You can only claim the foreign tax credit as I understand it against taxes paid on foreign-sourced income.) If this is so, then I pay the tax to the US and have to claim the foreign tax credit in Canada.

But then again they are held in Canada, and I receive Canadian T5 forms. So Canada seems to consider this all to be Canadian income. Then how do I treat them in my US taxes?

Is there some treaty provision to re-source the income? Or what in general do I do with these?

Thanks,
Carlo

[nelsona]

Your ETF dividends are US-sources. Any cap gains are Cdn sourced.

You need to re-source the dividends until the US tax is less than 15%. Since it likelt is, then you simply use the tax you get on your 1040 as a foreign credit in canada. Nothing needs credited on your 1040, unles it cap gains (which is Cdn sourced) or dividends greater than 15%.