David:
In the last couple days, you provided a response to someone
asking about
the taxability of income (and in their case also capital gains on
the sale of
their residence in Canada) of a US government employee in Canada.
My question is:
Given that a person is a dual US-Canadian citizen, and they are
employed
by the Canadian federal government *in Canada*....
Where is their Canadian government employee income taxable ?
Obviously
in Canada, but is it also taxable in the US, and if not, under
what
provision(s) of the Canada-US tax treaty ? How is the income
properly
excluded on the US return ?
Thank you very much for your time and consideration.
Sincerely,
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david ingram replies:
A dual citizen is NOT exempt under these rules.
A dual citizen working for the Canadian government in Canada
would be taxable in Canada first and then in the USA - However,
the income earned in Canada would not likely have any tax
liability in the US because of the 2555 exemption and foreign tax
credits if the income exceeded the $80,000 exemption on the 2555
form.
In a case where a Canadian/American made over $250,000 US on the
sale of their home in Canada, the house would be tax free in
Canada and the excess over $250,000 "would be" taxable on the US
return.
The Treaty exemptions are only tax free in Canada if you are NOT
a Canadian citizen.
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------------------------------
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