Discussion:Canadian provincial tax & form 1116

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Discussion Forum Index --> Advanced Tax Questions --> Canadian provincial tax & form 1116

Discussion Forum Index --> Tax Questions --> Canadian provincial tax & form 1116

PennTax (talk|edits) said:

27 May 2008
My client is a US resident working in Ontario. Someone else prepared his Canadian federal return, thank goodness. I'm completing the foreign tax credit for his US 1040.

Line 420 of the Canadian return shows Net Federal Tax of $100k. Line 428 shows Provincial tax of $60k. Can I enter the entire $160k on his 1116 form or am I limited to the federal tax?

I read the treaty, and Article II seems to exclude provincial taxes while Article XXIV seems to allow them.

Thanks for any assistance out there.

Riley2 (talk|edits) said:

28 May 2008
I believe that the credit should be allowed on the $60,000. See Article 24(7). Also, see Rev. Rul. 82-119 and 83-88. Also, see Reg ยง1.901-2.

KatieJ (talk|edits) said:

28 May 2008
Also there are a few states that allow credit for Canadian provincial taxes. New York and Massachusetts are examples. However, the credit is reduced by any credit for provincial taxes that was claimed for federal purposes.

PennTax (talk|edits) said:

28 May 2008
Thanks to both of you for the advice. I feel much more confident now! The citations were especially helpful.

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