1) yes
2) yes, and yes Schedule 7 is still required
3) Yes T1243 is required for non-registered investments deemed to be disposed. T1161 is also required if total value of all applicable assets is over $25K. Keep in mind that technically you are supposed to even put personal use property, such as your car on these forms (IF over $10K for T1161 AND meet TOTAL $25K threshold). So this might bring you over the $25K filing threshold for T1161.
4) Yes
Because you have both US source and Canadian source income on your departure return, you can only take a FTC on the US side for the proportional amount of tax on your Canadian source income ONLY.
To voluntarily remit you would calculate the 15% tax on your dividends ONLY (NOT grossed up) and send a cheque to the International Tax Centre in Ottawa with your departure return along with a cover letter explaining that you are paying this amount under Part XIII because your financial institution did not withhold the required 15% as they did not know you were a non-resident, etc.
Sounds about right for US side. Just also make sure you are under the FATCA reporting requirements. Your Canadian non-registered stuff will likely require PFIC reporting as well. Another reason to close this account.
Correct, no need to file a future Canadian return unless you purchase Canadian real estate, move back to Canada, have Canadian source income, etc in the future.
Make sure you notify all your financial institutions to let them know you are now a non-resident of Canada.
Choosing deemed resident or non-resident
Moderator: Mark T Serbinski CA CPA
You should also consider filing an election on the US side under Article XIII:7 to "bump-up" your ACB of non-registered investments on the US side. This will eliminate potential double taxation (timing mismatch of FTC) when you ACTUALLY sell these. You will need to submit T1243 with 8833 treaty return I believe.
I misunderstood your first question about the FTC's. I think what you were asking is how do you claim US tax paid in Canada, not the reverse.
It's basically like I said for the US side but in reverse, except that you need to break it down further for EACH of you.
So you would calculate HER US INCOME and proportionate US tax on her income and YOUR US INCOME and proportionate US tax separately on your income and put on each of your individual Canadian tax returns.
It's basically like I said for the US side but in reverse, except that you need to break it down further for EACH of you.
So you would calculate HER US INCOME and proportionate US tax on her income and YOUR US INCOME and proportionate US tax separately on your income and put on each of your individual Canadian tax returns.
Thanks for clarifying the FTC. So to simplify with an illustrative example:
-my annual income: 100k
-wife annual income: 50k
-joint US tax liability: 30k
my ftc: 20k
wife ftc: 10k
Correct?
I guess my situation feels more confusing since we were in the US all of 2016 but changed visa status in October. To complicate matters, the only "true" Canadian income we have is the LLP amount we need to claim.
Also, on the deemed disposition, the only item I can think of is a car I bought for 30k in 2014 while in the US on a J1, current value (based on KBB) about 15k. Since the current value is below $25k and I have no other material personal property to get me to that threshold, I don't have to fill form T1161, but I do have to complete form T1243 even though I don't have a capital gain.
-my annual income: 100k
-wife annual income: 50k
-joint US tax liability: 30k
my ftc: 20k
wife ftc: 10k
Correct?
I guess my situation feels more confusing since we were in the US all of 2016 but changed visa status in October. To complicate matters, the only "true" Canadian income we have is the LLP amount we need to claim.
Also, on the deemed disposition, the only item I can think of is a car I bought for 30k in 2014 while in the US on a J1, current value (based on KBB) about 15k. Since the current value is below $25k and I have no other material personal property to get me to that threshold, I don't have to fill form T1161, but I do have to complete form T1243 even though I don't have a capital gain.
Yes correct on the FTC calculation.
I thought you had non-registered Canadian div's and interest? Keep in mind that the interest and the div's you earned BEFORE departure still have to be included on your departure return as well (Jan 1 to Oct 1).
The Part XIII withholding on the div's only applies for the period of non-residency AFTER your departure (Oct 2 - Dec 31). You will likely need to request a report from your broker to determine what dates and what types of distributions were paid from the non-registered account. You will need this info so you can correctly segregate the amounts between your period of residency and non-residency. If you are lucky, you will be able to see this info on your normal statements, but not likely. You will need to contact your broker to get a report for the market value and ACB of all the funds as of Oct 1 anyway (deemed to be disposed), so ask for a report on the distributions as well.
Careful on the T1161. If the value of the car is over $10K (which it is - $15K) PLUS the FMV of the non-registered investments adds up to OVER $25K, then you DO have to complete the T1161 and include both the car and the non-registered investments.
I thought you had non-registered Canadian div's and interest? Keep in mind that the interest and the div's you earned BEFORE departure still have to be included on your departure return as well (Jan 1 to Oct 1).
The Part XIII withholding on the div's only applies for the period of non-residency AFTER your departure (Oct 2 - Dec 31). You will likely need to request a report from your broker to determine what dates and what types of distributions were paid from the non-registered account. You will need this info so you can correctly segregate the amounts between your period of residency and non-residency. If you are lucky, you will be able to see this info on your normal statements, but not likely. You will need to contact your broker to get a report for the market value and ACB of all the funds as of Oct 1 anyway (deemed to be disposed), so ask for a report on the distributions as well.
Careful on the T1161. If the value of the car is over $10K (which it is - $15K) PLUS the FMV of the non-registered investments adds up to OVER $25K, then you DO have to complete the T1161 and include both the car and the non-registered investments.
Correct on the FTC calculation assuming all the income in your calculation is US source income (you didn't specify). Would look like this if you also had Canadian income.
-your US annual income: 100k
-your Canadian investment income $10K
-wife annual income: 50k
-joint US tax liability: 30k
your ftc: 18,750
wife ftc: 9,375
-your US annual income: 100k
-your Canadian investment income $10K
-wife annual income: 50k
-joint US tax liability: 30k
your ftc: 18,750
wife ftc: 9,375
Agreed on the non-registered investments. Thank you, SM.
But I'm not sure I'm following your last calculation that includes Canadian income. The reality is that all of our earned income is US sourced, but that we will have to claim the previous LLP withdrawals as Canadian sourced income since we didn't repay in time. I understand how you got to your numbers (i.e. proportion of total combined income), I'm just not sure I understand the logic given that your calculations only provide an FTC of $28,125 when the total we've actually paid is $30,000. Doesn't that create a situation for potential double taxation?
But I'm not sure I'm following your last calculation that includes Canadian income. The reality is that all of our earned income is US sourced, but that we will have to claim the previous LLP withdrawals as Canadian sourced income since we didn't repay in time. I understand how you got to your numbers (i.e. proportion of total combined income), I'm just not sure I understand the logic given that your calculations only provide an FTC of $28,125 when the total we've actually paid is $30,000. Doesn't that create a situation for potential double taxation?
You're missing the point on this Canadian source income on your US return.
The additional $1875 of US tax is the US tax paid on the $10K of Canadian source income on the US return. Canada is not going to give you a foreign tax credit for US tax paid on Canadian source income.
In this example, I was just assuming your Canadian div's and interest were $10K for easy math. Whatever the amount actually is, you WILL have to report this investment income on your US return.
Yes correct, you include your WORLDWIDE income up to your date of DEPARTURE ONLY. After you depart you will be considered a non-resident of Canada and won't have to report US source income in Canada any longer. To figure this out, use the number of WORKING days you worked while you were a resident of Canada vs total WORKING days for the entire year.
The additional $1875 of US tax is the US tax paid on the $10K of Canadian source income on the US return. Canada is not going to give you a foreign tax credit for US tax paid on Canadian source income.
In this example, I was just assuming your Canadian div's and interest were $10K for easy math. Whatever the amount actually is, you WILL have to report this investment income on your US return.
Yes correct, you include your WORLDWIDE income up to your date of DEPARTURE ONLY. After you depart you will be considered a non-resident of Canada and won't have to report US source income in Canada any longer. To figure this out, use the number of WORKING days you worked while you were a resident of Canada vs total WORKING days for the entire year.