Non-recognition of pension income splitting; both ways?

MGeorge · Post by **MGeorge** » Wed Sep 26, 2012 10:18 am

Hi All,

I have a question regarding pension income splitting. This applies to my mother who is a US citizen, resident in Canada, married to a non-US citizen.
If my Mom's husband receives a pension and elects to "income split", does the pension income reported on my Mom's Cdn return have to be reported on her US return? I've heard that the US doesn't recognize pension income splitting; but I've only heard cases where the US citizen receives a Cdn pension and elects to income split with his/her non-US spouse.

If it doesn't need to be reported on the US return, can the Canadian tax attributable to this pension income splitting be claimed as a foreign tax credit, or does it need to be "disallowed" or excluded in some manner on form 1116. I appreciate the advice.

Regards.

nelsona · Post by **nelsona** » Wed Sep 26, 2012 11:43 am

The income does not have to be reported on your mothers US return (assuming she files MFS).

The tax she pays however can be included as general categrory income tax for 1116 purposes. Of course, it is unlikley that she has suffcient foreign gen income to be able to use any of this tax, so it is merely an exercise in carrying forward unused tax.

It could instead be used (in the year that it is paid) as a foreign tax deduction, along with any other Cdn/prov tax that SHE pays during any particular calendar years, like on her SS/CPP/OAS.

But again, it is unlikely to benefit her, as I'm quite sure she is already not taxable in US.

MGeorge · Post by **MGeorge** » Wed Sep 26, 2012 2:16 pm

Hi nelsona,

Thank you for your reply. I didn't actually know that pension income is considered "general category" I assumed it was passive. Is this true for CPP benefits as well?

I appreciate your comments.

nelsona · Post by **nelsona** » Wed Sep 26, 2012 2:31 pm

Yes. Only true non-registered investement income is passive.

nelsona · Post by **nelsona** » Wed Sep 26, 2012 2:32 pm

Of course, CPP and OAS and SS would not be reported on her 1040, by treaty, since she lives in canada

MGeorge · Post by **MGeorge** » Fri Sep 28, 2012 9:26 am

Thank you nelsona - this clears up a lot.

graham77 · Post by **graham77** » Tue Nov 20, 2012 9:15 am

Your concerns are right, thanks for enough participation. I hope all of our doubts have been cleared now.