Sale of Rental Property in Canada

[John of PA]

Hope everyone is holding up well. A new client of mine (lives in Pennsylvania) sold thier rental property in Montreal, Canada. I asssume they pay tax on the gain on thier Fed and State retrun, then take a foreign tax credit for the Canadian Tax withheld at settlement. Any comments?

[ED SMITH]

That's exactly right John. Just remember to make the currency conversion.

[ecb34691]

Last year it was almost even (at least at the end of the year), but on large amounts there could be a difference.

[John of PA]

Canadian Tax credited against State?

Thanks, Can the Canadian Tax be credited on the State return as well? (state is PA).

[KBTS]

Thanks, Can the Canadian Tax be credited on the State return as well? (state is PA).

Looks like you can; but as usual, PA's instructions are not clear on what you need to do. PA revised the Sch G (where you claim the credit) this year and now there are three versions to try and figure out which ones to use. Here are the instructions from the PA-40 booklet on the subject:

Enter your total allowable PA credit for Personal Income
Tax that you paid to another state(s) or country. You must:

• Submit a PA Schedule G-R and PA Schedule G-S or
PA Schedule G-L and a photocopy of each tax return
that you filed in another state or country. PA Schedules
G-R, G-S and G-L and their instructions are not included
with this booklet and may be obtained by using one
of the Forms Ordering Services on page 3.

But the PIT Guide states it this way:

Foreign Taxes Paid.
The taxpayer must submit a copy of the Federal foreign tax credit form plus a copy of the statement showing the
amount of foreign income and any taxes withheld at the source. Even if the taxpayer does not claim the credit on the
Federal tax return, the Department wants the Federal schedule. The Department does not have a PA schedule for
this specific situation.

It looks like the PIT Guide perhaps has not been updated since the addition of the new versions of Sch G, so I would start with the instructions for Sch G and see if you need to use them.

[John of PA]

Ty

RBTS, Thank you so much, that was very helpful.