Reporting Canadian T3 Boxes 25, 34 and 42 on U.S. return ?
Moderator: Mark T Serbinski CA CPA
Reporting Canadian T3 Boxes 25, 34 and 42 on U.S. return ?
How does a dual US/Canadian citizen, resident in Canada, with no US source income (other than the T3 amounts) report the values from T3 Boxes 25, 34 and 42 on his/her U.S. return?
Let's do this in words: You have a mutual funds that distributed dividends for which US tax was withheld? what was the explanation for box 42?
Box 34 is easy: you report this as US tax paid on your 1040, it will be refunded.
You proboably should be notifying the broker that you are a US citizen (submit a w-9) that way they should not withhold any US tax. But any US tax you pay is credited to you as if you has sent it to IRS yourself.
Box 34 is easy: you report this as US tax paid on your 1040, it will be refunded.
You proboably should be notifying the broker that you are a US citizen (submit a w-9) that way they should not withhold any US tax. But any US tax you pay is credited to you as if you has sent it to IRS yourself.
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
Thanks, nelsona, for your input.
You asked for the Box 42 explanation. The T3 originates from a Personal Portfolio Services account at CIBC. Here are all of the relevant definitions listed on the back of the T3.:
T3 - Statement of Trust Income Allocations and Designations
T3 Box 25 - Foreign non-business income - include this amount on line 121 of your return and on line 433 of Form T2209.
T3 Box 34 - Foreign non-business income tax paid - include this amount on line 1 of Form T2209, Federal Foreign Tax Credits.
T3 Box 42 - Amount resulting in a cost base adjustment - This amount represents a distribution of return of capital from the trust. Follow the instructions in the footnote area and adjust the cost base of the property at the end of the tax year. For more information, see information Sheet RC4169, Tax Treatment of Mutual Funds for Individuals.
How do I know from the T3 that any or all of the T3 amounts in Box 25 arise from U.S. sources? The Form doesn't state the country of origin. All it says is that the income is foreign to Canada. Assuming for a moment that it is all U.S. source income, where do I report the Box 25 amounts on the U.S. Return? You didn't mention that in your previous reply.
A related question. Since the T3 is named "Statement of Trust Income Allocations and Designations", does this imply that a U.S. Form 3520/3520A must be filed for the account that gave rise to the issuance of this T3?
BTW, I have lived in Canada for 39 years. I have always filed both U.S. and Canadian returns but only twice has there been any U.S. tax due and even then it was a very small amount. It seems that every year the U.S. tax return is getting more complicated to prepare. It's such a wasteful process given that I won't have any U.S. tax payable anyway. Sigh.
You asked for the Box 42 explanation. The T3 originates from a Personal Portfolio Services account at CIBC. Here are all of the relevant definitions listed on the back of the T3.:
T3 - Statement of Trust Income Allocations and Designations
T3 Box 25 - Foreign non-business income - include this amount on line 121 of your return and on line 433 of Form T2209.
T3 Box 34 - Foreign non-business income tax paid - include this amount on line 1 of Form T2209, Federal Foreign Tax Credits.
T3 Box 42 - Amount resulting in a cost base adjustment - This amount represents a distribution of return of capital from the trust. Follow the instructions in the footnote area and adjust the cost base of the property at the end of the tax year. For more information, see information Sheet RC4169, Tax Treatment of Mutual Funds for Individuals.
How do I know from the T3 that any or all of the T3 amounts in Box 25 arise from U.S. sources? The Form doesn't state the country of origin. All it says is that the income is foreign to Canada. Assuming for a moment that it is all U.S. source income, where do I report the Box 25 amounts on the U.S. Return? You didn't mention that in your previous reply.
A related question. Since the T3 is named "Statement of Trust Income Allocations and Designations", does this imply that a U.S. Form 3520/3520A must be filed for the account that gave rise to the issuance of this T3?
BTW, I have lived in Canada for 39 years. I have always filed both U.S. and Canadian returns but only twice has there been any U.S. tax due and even then it was a very small amount. It seems that every year the U.S. tax return is getting more complicated to prepare. It's such a wasteful process given that I won't have any U.S. tax payable anyway. Sigh.
I know and can read the back of a T3.
You still didn't say what was written in the footnote explainbing box 42. on the FRONT of the slip.
Regardless of the origin of the income, it needs to be reported on 1040 as either interest or dividends. Your broker knows this info, or you can find it from your monthly/qusrterly brokerage statements. Since your've been filing a long time in US, I truct you know where didivdend and interst are reported. add it to the ammounts you are already reporting from other investments.
You need to know the source of the income for 2 reasons:
1. If it is from US, you cannot claim that it is foreign income to use on passive income 1116. Nor can you se any Cdn tax paid on that income on that form.
2. If it is not from US, then you can use it on your passive 1116 form (country: Various) along with the foreign tax paid AND the Cdn tax.
You'll need to contact the broker to find out the source for this income, and what countries tax was sent.
You do not nbeed 3520/3520-A for thes accounts. But you do need to address the PFIC issues of holding mutual funds. Have you begun filling out these special forms in the last 2-3 years. They are a major headache and give rise to US tax when no Cdn tax is due. IRS Form 8621
I'm sure you are already filing FInCEN (new FBAR) and foreign asset form 8938 and RRSP 8891's of course.
You still didn't say what was written in the footnote explainbing box 42. on the FRONT of the slip.
Regardless of the origin of the income, it needs to be reported on 1040 as either interest or dividends. Your broker knows this info, or you can find it from your monthly/qusrterly brokerage statements. Since your've been filing a long time in US, I truct you know where didivdend and interst are reported. add it to the ammounts you are already reporting from other investments.
You need to know the source of the income for 2 reasons:
1. If it is from US, you cannot claim that it is foreign income to use on passive income 1116. Nor can you se any Cdn tax paid on that income on that form.
2. If it is not from US, then you can use it on your passive 1116 form (country: Various) along with the foreign tax paid AND the Cdn tax.
You'll need to contact the broker to find out the source for this income, and what countries tax was sent.
You do not nbeed 3520/3520-A for thes accounts. But you do need to address the PFIC issues of holding mutual funds. Have you begun filling out these special forms in the last 2-3 years. They are a major headache and give rise to US tax when no Cdn tax is due. IRS Form 8621
I'm sure you are already filing FInCEN (new FBAR) and foreign asset form 8938 and RRSP 8891's of course.
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
Thank you again, nelsona. Your comments have been very helpful. Sorry about quoting the descriptions from the back of the form. No offense intended. I don't see a footnote on the front of the form related to Box 42, so I guess I can't add anything more there. I'm OK with the FinCen reporting; forms 8891, 8938, etc. I've dealt with Canadian interest, and dividends from Canadian corporations, almost every year in the past so that's OK too but the T3 showing foreign income is new to me. Thanks for the reminder on the W-9.