Protocol 5 Implications

[kaba3@aol.com]

Protocol 5

I am a US citizen/Can.resident and file taxes in both countries. This is the 1st year I have received 1099-DIV and 1099- INT forms in addition to the Can T5 forms. Is this because of Protocol 5?

I have always claimed ALL dividend income as income on line 9. The 1099-DIV form has about 1/3 my income in box 1 (taxable) and 2/3 in box 3 (nontaxable earnings). What is this?? The explanation talks about cost basis and cap. gains/losses. I pay cap. gains only in Canada which calculates cost basis differently from the US. But, regardless, do I include all of my US dividends earned as income on line 9 or not?

Do I pay US tax on interest income, being a resident of Canada? On all? US-based interest only? On none?

Both the 1099 and T5 forms show that US tax was withheld and then given back plus an additional $16. Was this because of Protocol 5? Is the $16 due to exchange rate differences between the time the tax was withheld and the time it was given back? Do i owe the $16 to the US?

Thank you, KBA

[nelsona]

Notquite sure what you are asking. As a US citizen living in Canada, you must report all your income on BOTH your Cdn return and your US return. this has always been the case, and is not changed by the treaty protocol.

Regardless of whether you received a slip in the past, you were responsible for reporting the income.

[kaba3@aol.com]

I realize I must report all income on both US and Can tax returns.

My first question is why is 2/3 of my US-based dividend income in box 3 on the 1099-DIV which is labeled " nontaxable distributions"? I was under the impression that all dividend income is taxable.

Second, under the column "paid by you" on my T5 and 1099 is a -$16. How do I pay a negative $16?

Thanks again, KBA

[nelsona]

ask your broker.