Donation made prior to becoming a US resident - deductible?

mackayr · Post by **mackayr** » Wed Mar 23, 2011 10:16 am

I have a client that inadvertently made a large contribution to a US charity in 2009 (he belongs to a church in Canada that is headquartered in the United States and didn't want any local recognition for his contribution, so he sent the contribution to the US headquarters and received a US charitable donation receipt. He wasn't aware, and nor were they, of the implications of donating to the US counterpart). Coincidentally, he has subsequently married a US citizen and has taken up residency in the United States effective August 2010. Is there any way that he can deduct this amount on a subsequent US return? On researching the carry forward provisions, he can only carry forward an amount that exceeds 30% (or a different percentage) of his AGI. The only way that I forsee utilizing this deduction would be to argue that his AGI for 2009 is Nil, 30% of Nil is Nil, and the entire amount is carried forward to 2010 (and subsequent years).

Any ideas on whether or not this would fly? Unfortunately, I can't find any information whatsoever on whether or not donations made prior to establishing residency can be claimed and/or carried forward.

Thanks,

Rob

nelsona · Post by **nelsona** » Wed Mar 23, 2011 2:49 pm

He would likely have to file a 1040 for 2009 to make this claim (cdns are always entitled to file a 1040 by treaty), as this is the only way to prove his AGI, and one would have to see if his AGI would indeed be nil.

mackayr · Post by **mackayr** » Fri Mar 25, 2011 2:11 pm

I wasn't aware that Canadian are always allowed to file a 1040 by treaty. I was thinking a 1040NR (or perhaps that's what you meant). My understanding is that since this fellow has no effectively connected income, his AGI would be nil, thereby allowing a carry forward of the entire donation. He'd merely need to file a nil 1040NR to accomplish this.

However, on speaking with an agent at the IRS (I know how invaluable such a discussion can be), they indicated that there would need to be a reason to file a return (eg. effectively connected income or non-effectively connected income that wasn't properly reported on a 1042 slip), implying that you couldn't just file a Nil return for no reason. I can't find anything substantiating that position.

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nelsona · Post by **nelsona** » Fri Mar 25, 2011 2:27 pm

1040.

mackayr · Post by **mackayr** » Mon Mar 28, 2011 8:24 pm

Can anyone could point me in the direction of information about the provision that allows a Canadian to file a 1040? I've read and re-read what I believe are the relevant articles in the treaty and can't seem to find it. I've also re-read publication 597 to no avail.

Thanks in advance!

nelsona · Post by **nelsona** » Mon Mar 28, 2011 8:51 pm

Its article XXV. " not subject to ... other or more burdensome".