CORRECTION - Unused non business foreign tax credit in Canada Line 431 and 433 - David Ingram gives expert income tax & immi

It's not often that my answer is just plain wrong.  However Andrew Nelson pointed out that I mixed my answer and even the document I sent gave the right answer.  The question was can foreign "NON"-business taxes be carried forward and I said "yes" and the answer is "NO".
 
The document itself says "For tax years ending before March 23, 2004, you can carry unclaimed foreign business income taxes back three years and forward seven years. For tax years ending after March 22, 2004, the carry forward period is 10 years."
 
Andrew's correction follows:  (Luckily, I did not bother Intuit and do NOT have to look at old returns to see if I missed it).
 
Have to correct you on this one, david. WRONG-O!
 
NON-business foreign tax CANNOT be carried forward or back in Canada.
 
Only foreign tax on BUSINESS income is eligible for carry forward/back.
 
This is pretty clear in the documanent you sent, as well as on Form
T-2209, and in IT-270.
 
Must have been late when you wrote this. Hope you're not bothering
Intuit about this, since they have it right.
 
Cheers
 
AGN
-----Original Message-----
From: [email protected] [mailto:[email protected]]On Behalf Of US / Canada Income Tax Help - CEN-TAPEDE
Sent: Tuesday, January 16, 2007 9:08 PM
To: CENTAPEDE; [email protected] Com
Subject: US USA / CANADA Income Tax Help - Unused non business foreign taxcredit in Canada Line 431 and 433 - David Ingram gives expertincome tax & immigration help to non-resident Americans &Canadians from New York to California to Mexico family, estate,income tr

Subject:        Unused non business foreign tax credit
Expert:         [email protected]
Date:           Tuesday January 16, 2007
Time:           04:39 PM -0500

QUESTION:

Can you use unused non business foreign tax credit from previous years to reduce 2006 Canadian taxes.

Canadian Citizen working in the US H1B.

Thank You
----------------------------------------
david ingram replies:

The answer is yes.  Prior to 2004, the claim could be carried forward for 7 years. after 2004, the credit can be carried back 3 years and forward 10 years.

And I want to thank you for the question.I just checked and "as I use it" our tax software Intuit's "PROFILE" does NOT carry the excess forward and I might have a couple where I have missed the credit.  INTUIT's US Proseries which I also use, does carry the excess forward.

The following comes from the CRA website at:

http://www.cra-arc.gc.ca/tax/individuals/topics/income-tax/return/completing/deductions/lines409-485/431-433-e.html

Canada Revenue Agency Government of Canada
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Lines 431 and 433 - Federal foreign tax credit

This credit is for foreign income or profits taxes you paid on income you received from outside Canada and reported on your Canadian return. Tax treaties with other countries may affect whether you are eligible for this credit.

Note
You may have deducted an amount on line 256 for income that is not taxable in Canada under a tax treaty. In that case, do not include that income, or any tax withheld from it, in your foreign tax credit calculation.

If you paid tax to more than one foreign country, and the total non-business income tax you paid to all foreign countries is more than $200, you have to do a separate calculation for each country for which you claim a foreign tax credit. In that case, enter the total of your allowable federal foreign tax credit on line 42 of Schedule 1 or line 45 for residents of Quebec.

You also have to do a separate calculation for business income taxes paid to each foreign country. In that case, use Form T2209, Federal Foreign Tax Credits, to calculate your credit for both non business income taxes and the business income taxes paid to each foreign country. For tax years ending before March 23, 2004, you can carry unclaimed foreign business income taxes back three years and forward seven years. For tax years ending after March 22, 2004, the carry forward period is 10 years.


In most cases, the foreign tax credit you can claim for each foreign country is whichever of the following two amounts is lower:

  • the foreign income tax you actually paid; or
  • the tax due in Canada on your net income from that country.


Note
If you paid tax on income from foreign property (other than real property), your foreign tax credit for the income from that property cannot be more than 15% of your net income from that property. However, you may be able to deduct on line 232 the part of the foreign taxes you paid over 15%.

Beginning in 2004, your contribution to a foreign public pension plan is considered as a non-business income tax for foreign tax credit purposes where the following two conditions apply:

  • you are required to make the contribution under the legislation of the foreign country; and
  • it is reasonable to conclude that you will not be eligible for any financial benefit from your contribution considering that the employment in the foreign country was temporary and for a short period of time.

Note
U.S. FICA payments qualify for this credit.

For details on how to calculate your claim, read Interpretation Bulletin IT-270, Foreign Tax Credit and ITNEWS-31R2 Income Tax - Technical News.

Supporting documents - If you are filing a paper return, include your documents, such as official receipts, that show the foreign taxes you paid, and a note showing your calculations. Also include Form T2209, if you use it. If you paid taxes to the United States (U.S.), attach your W-2 information slip, U.S. 1040 return, and any other supporting documents that apply. If you are filing electronically, keep all your documents in case we ask to see them.

Tax Tips

Your federal foreign tax credit on non-business income may be less than the tax you paid to a foreign country. If so, and you were not a resident of Quebec on December 31, 2006, you may be able to claim a provincial or territorial foreign tax credit. Get Form T2036, Provincial or Territorial Foreign Tax Credit, to help you calculate the credit.

If you were a resident of Quebec on December 31, 2006, see the guide for your provincial income tax return for Quebec.

Also, on line 232, you may be able to deduct the amount of net foreign taxes you paid for which you have not received a federal, provincial, or territorial foreign tax credit. This does not include certain taxes you paid, such as those on amounts you could have deducted under a tax treaty on line 256. For details, get Interpretation Bulletin IT506, Foreign Income Taxes as a Deduction From Income.

Completing your tax return

  • Do all of your calculations in Canadian dollars.
  • Complete Form T2209 if you decide, from the information above, it applies to you.
  • On line 42 or line 45 for residents of Quebec of Schedule 1, enter your federal foreign tax credit from line 10 of your Form T2209.

Otherwise:

  • On line 431 of Schedule 1, enter your non-business income tax paid to a foreign country.
  • On line 431 of Schedule 1, enter the amount shown in the financial statements or in boxes 81 and 82 of your T5013 or T5013A slip if you were a member of a partnership and are entitled to claim a part of the foreign taxes the partnership paid.
  • On line 433 of Schedule , enter your net foreign non-business income.
  • On line 42 or line 45 for residents of Quebec of Schedule 1, enter the result of your calculation.

Be sure to complete the tax and credit form for your province or territory of residence as the provincial or territorial credit is calculated separately.

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