The income tax filing period is approaching and I am diving more into how to handle all of these treaty issues....
My wife and I are both residents of Canada and I commute daily to the US to work (H1B). None of us are US citizens.
I have more or less got the grip on how to file the 1040NR together with the pro forma 1040 to take advantage of the provision in Article XXV of the treaty, and how to calculate the "new" tax (yay!)
One question: I have withdrawn an amount under HBP in 2010 to buy our home. It is not taxable to me in the US anyway since I am not a resident BUT if I were one, I would have to file form 8833 mentioning article XVIII(1) (right?) not to be taxed... my question is, do I have to attach this form to my hypothetical 1040 to not include that amount in my income as well?
Form 8833 with pro forma 1040 for HBP?
Moderator: Mark T Serbinski CA CPA
Good question.
If you were a US citizen living in canada, and you started an HBP, while the entire HBP withdrawl would not be taxable in US (per treaty article xviii(1) ), it would be considered an RRSP withdrawal, and would thus require determination of a portion of your PREVIOUSLY deferred income (per article xviii(7)), since you would have been filing 8891 all along, and presumabble deferring taxation. A portion would thus be taxable because you had previously sheltered it.
In your case however, since you have no obligation to elect to defer RRSP income (you aren't filing an 8891, for example), then no RRSP income would be included on your return in any event.
It would not be wrong for you to include an 8833 for the HBP, although I'm also comfortable with you not including it, since your 1040 is a pro forma.
If you were a US citizen living in canada, and you started an HBP, while the entire HBP withdrawl would not be taxable in US (per treaty article xviii(1) ), it would be considered an RRSP withdrawal, and would thus require determination of a portion of your PREVIOUSLY deferred income (per article xviii(7)), since you would have been filing 8891 all along, and presumabble deferring taxation. A portion would thus be taxable because you had previously sheltered it.
In your case however, since you have no obligation to elect to defer RRSP income (you aren't filing an 8891, for example), then no RRSP income would be included on your return in any event.
It would not be wrong for you to include an 8833 for the HBP, although I'm also comfortable with you not including it, since your 1040 is a pro forma.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best