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Non-Resident Canadian Return for Partnership Interest

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    Non-Resident Canadian Return for Partnership Interest

    My client received a Schedule K-1 from a limited partnership that shows the following (amounts rounded up):

    Box 1 Ordinary Business Income $30,000
    Box 5 Interest Income $10

    Foreign Transactions
    16A Name of country: Canada
    16C Foreign Income: $30,000
    16P Foreign Tax Paid Canadian Income tax Withholding $1200
    16P Foreign Tax Paid Eritrea Income $9150

    Also with the K-1, I am provided the T5103 reporting the Canadian Income and the Canadian tax withholding. This is pretty straight forward, I know what I need to do with this.

    My questions are:

    - If I convert the Schedule K-1 using the same conversion rate used for Canadian tax withholding (because I can see the USD and the CAD amount), then can I then report the income from Eritrea under "other income" and then claim the foreign tax credit on the non-resident Canadian return?

    Example $1200 USD Canadian withholding
    $1,586 CAD Canadian Withholding reported on T5013
    A conversion rate of 1.322

    Ordinary Income $30,000 USD
    Ordinary Income $39,650 CAD (Using the 1.322 conversion rate)
    Ordinary Income $12,231 CAD Reported on T5013
    Ordinary Income $27,419 CAD Income from Eritrea

    By reporting the other income and claiming the foreign tax credit, this brings the tax due amount down by almost $600USD.

    Feedback would be greatly appreciated.

    #2
    Is the K-1 already reporting everything in US$ ?? It appears so. IF that is the case, the US tax return, to include Form 1116, should be fairly straightforward.
    Does there exist, perhaps, a similar set of CANADIAN K-1 type tax paperwork, with the amounts shown in CA$ ??
    It would appear the amounts, separated by country of income origin, are primarily a matter of Form 1116 treatment.
    I could not find any instructions for a Line 16P entry. Will assume there was some explanation in the Sch K-1 documents from the PTS.
    Are you certain a Canadian non-resident) tax return is required? I have had clients who receive Forms 1099-DIV with the obligatory 15% Canadian tax withholding. They just reported everything on Form 1040, used Form 1116, and moved on. No Canadian tax return was ever filed.
    Keep us updated. I have a new client who is in the Canadian military (stationed in US), is currently very active in stock markets using a (US) SSN...not ITIN, and has a new spouse who is a US citizen/resident. I foresee mountains of confusion when their 2020 tax returns are prepared.
    FEDUKE404 Sorry for the late follow up. The K-1 was reported in USD and it included all worldwide income.
    My client also received the Canadian Form T5103 reporting the Canadian income only. Therefore, I learned that I had to file a Canadian return because additional tax was due. I then reported total foreign income and foreign taxes paid on Form 1116. Hope this helps.

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