How to apply 1116 for vested stock option

allen · Post by **allen** » Mon Apr 09, 2007 2:38 pm

Hi All

Hopefully I can state my question clearly.

I was given stock option from my former Canadian employer,
and exercised it via ETrade-Canada after I entered US under TN.

The total gain for the transaction was about 477 US,
and there were Canadian federal and Quebec withholding,
which were 120 and 150 US respectively.

Can I claim FTC for the withholding part in this case?
If Yes, how?

Thanks in advance for any insight.
All the best.
Allen

nelsona · Post by **nelsona** » Mon Apr 09, 2007 2:51 pm

Did you leave canada in 2006, or earlier than that?

If you left in 2006, then the option is merely part of your income (wages) for 2006. You add it to your 2006 cdn return, it is for all purposes 'wages'. Then you do your FTC calculations on this basis.

If however, you left canad before 2006, then these 'wages' are exempt from Cdn (and QC) tax, since they are below $10,000. You should be filinga Cdn non-resident return, and exempting the entire ammount, thus getting your money back.

As such, you will have no clim for foreign tax either as a credit or a deduction.

i'm curios as to why there was so mauch tax withheld. Did you exercise and sell imediately, or did you exercise and then sell, and the $400 is merely your gain, with the withholding really being on the ammount you were given.

allen · Post by **allen** » Mon Apr 09, 2007 3:04 pm

Thanks a lot for your quick response, Nelsona.

First let me clarify some the background info.

I left Canada in April 2006. Since I worked in Canada before the leaving,
I also got wages around 20000 US from the Canadian employer.

Yeah, you were right about the stock option, which I did exercise and sell imediately. ( you know how QC taxes. :))

From your response, I think I can do FTC on this option for my US tax return,
and treat it as income (for all purpose) for my Cdn return,
right?

Thanks again for your help.
Best Regards
Allen

nelsona · Post by **nelsona** » Mon Apr 09, 2007 3:20 pm

You can use it as foreign income. However the tax that you can get credit for will not be the ammount that was withheld. As I said, it becomes part of your Cdn wages for the year, thus the tax related to it will be proportion to all your other income and tax.

allen · Post by **allen** » Mon Apr 09, 2007 3:45 pm

Thanks a lot for your anwser, nelsona.

Could you recommend a document (other than the 1116 guide from irs),
or other resource about filing 1116?
I was totally lost with this form.

Thanks again for your time and help.
I really appreciate it.
Allen

nelsona · Post by **nelsona** » Mon Apr 09, 2007 4:15 pm

1116 should only be attempted with tax software.

allen · Post by **allen** » Mon Apr 09, 2007 4:35 pm

Thanks for your suggestion, Nelsona.

I tried with a tax preparer, it would give nothing from it.
I just found a walkthrough sample from this site:
http://www.unclefed.com/IRS-Forms/2001/HTML/p51410.html

I will try my luck with it.

Thanks again for your help and insight.
Allen