please advise which would be most strategic way to go

nelsona · Post by **nelsona** » Sun Oct 02, 2011 3:34 pm

2555 can be used for wages ONLY.
1116 can be used for all types of income, by class (passive, general, etc).

So unless you have no other income than from wages, you can use 2555 by itself, otherwise you will use 1116 on your non-wages, and choose 1116 or 2555 on your wages.

note that excluding your wages, probably makes you ineligible for the $1000 per child tax credit.

proxy · Post by **proxy** » Sun Oct 02, 2011 4:02 pm

On my T1 the 29k is classified as "Other income" , it says:
130. Allocation Income from ABC Inc (its a Canadian Corporation)

That is the only income we have in 2010 in Canada.

We do not have children.

So, that leaves me with 1040 and 1116, correct?

proxy · Post by **proxy** » Sun Oct 02, 2011 4:08 pm

oh on 1116, which one would I check?
a. Passive category income
b. General category income
c. Section 901 income
d. Certain income re-sourced by treaty
e. Lump-sum distribution

nelsona · Post by **nelsona** » Mon Oct 03, 2011 7:32 am

You do nt say what allocation income is, or how you earned it. Once you figure that out, look thate definitions of passive and general. You did noy need to list the types of 1116's there are. I'm familiatr with them.

proxy · Post by **proxy** » Wed Oct 05, 2011 8:12 pm

I earned it through Canadian corporation I created.

I have one more question.

If this Canadian corporation had a capital gain from sale of assets in 2011 (over $100k), and considering that I will be filing 1040 for 2011:
Do I have to report the capital gain that this Company had on my 1040? or is there a way to keep the capital gain within the Corporation and not distribute it to me in 2011? (and pass it on to me in 2012, or maybe invest these funds in other parts of my business)

If the answer is NO and the capital gain must be distributed to me in 2011, what kind of a treaty/form can be used so that I do not get double taxed if these capital gains are revealed through my 2011 filings?

nelsona · Post by **nelsona** » Wed Oct 05, 2011 11:23 pm

I would suggest you ask a pro. Business tax deserves business treatment, not free advice on a forum. You eesrn money for your efforts, so should your tax advisor.

proxy · Post by **proxy** » Wed Oct 05, 2011 11:56 pm

I have one accountant in US and one accountant in Canada.

The advise I received on this forum from you has been the best advice I have received this year.

Being a long time internet guy, I take special comfort in the free flow of information through forums. So just want to say thx