form 1116, foreign tax credit and rental income tax

[shsamardar]

Thank you for your reply.

The conditions doesn't seem make difference between brokerage and rental. it says 'passive income' . I was also referring to my Canadian tax filing( and not NR6) as a reported document as 'SIMILAR SUBSTITUTE STATEMENTS'

If in context of schedule E , my rental is passive, Isn't rental income a passive income in context of form 1116 too?



When I enter the information in TurboTax, it doesn't print form 1116.

[nelsona]

You MUST use 1116. Period.

If you can't print 1116 contact Intuit.

[shsamardar]

In form 1116, there is an entry says:

"Expenses definitely related to the income on line1a"


Is US depreciation amount of rental property I am reporting on schedule E considered an expense for this line in 1116?

[nelsona]

This is a common mistake people make:

The "gross" income for 1116 purpose, is the "taxable" income from elsewhere on the tax return.

So the gross income on your 1116 is the net (taxable) income you come up with on your schedule, and on the rental line (line 17) of 1040.

The expenses are items from either lines 23 to 35, or from schedule A. They are not expenses that have already been taken into account on your schedlue E.

generally there are no expenses specific to rental income other than those reported on your schedule E, other than, perhaps, foreign real estate taxes.

You generally don't want any of youre expenses to hit your foreign income., as this willserve only to reduce your foreign tax credit.

[shsamardar]

my line 17 of 1040 is zero. I had net positive from rental but I had carryover passive loss from last years that I applied them to my posiitve net

Am I still eligible for US tax credit on tax I am paying to Canada?

[nelsona]

You cannot get any foreign tax crdit if you do not have any foreign income, which is your case.

You should be looking to LOWER your Cdn taxes, by depreciating. Otherwise, you are setting yourself up for paying Cdn tax now and US tax later with no crediting possible.

Any reason why you did not use the passive loss last year on your 1040?

[shsamardar]

Thank you for your reply

even with depreciation in canada, i still have positive income.

to answer to your question for
"Any reason why you did not use the passive loss last year on your 1040?"

in prior years i had losses that all accumulated.

[shsamardar]

from your previous replies, if my line 17 of 1040 is zero , there is no foreign tax credit available in USA

but still I am paying to canada.

The amount i am paying to Caanda, Can I carry over this amount to my next year 1118 US form next year?

[nelsona]

I'm still puzzled how you could have positive income in CRA-space and negative in IRS space, the expenses are almost identical.

But, to your question, yes, you should report the Cdn tax this year on 1116, and carry it all forward for 10 years.

I do not understand the statement "in prior years i had losses that all accumulated"

[shsamardar]

Thanks Nelsona

What I meant from " In prior years I had losses that all acumulated"
is:
on my schedule E, line 21 is positive. but I have form 8582 and line 1c from there "Prior years unallowed losses" has some amounts.

I am using prior year losses to offset this year profit, therefore line 22 in schedule E is zero

In Canada, We don't have such a carryover loss concept, therefore i am paying small tax to canada.