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Gold/Mining/Energy : Canadian REITS, Trusts & Dividend Stocks
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To: Tommaso who wrote (9804)9/27/2005 10:38:29 AM
From: LTBH  Read Replies (3) of 11633
 
Thats quite a half truth which must be meant to confuse and misdirect based on the lack of definition you provide.

Assuming that if SI readers have these investments that they are significant enough to cross the one line checkoff threshhold of 300/600 then:

For US residents that pay US taxes; foreign tax paid on a taxable account is NOT a direct credit against US taxes owed!!! Rather its an input into the warren of various derating schemes of the form 1116 which will DECREASE any allowance for ultimate credit from taxes owed.

There is no way to predict what percentage (but it certainly will be much less than a full 100%) of the foreign tax paid will be allowed. This is highly variable and very specific to each individuals particulars.

In my five years of owning Canadian Income trusts the most I was allowed was 40% of the foreign taxes actually paid, the least was just over 2%. These figures ignore the added bite of prior years on the illegally withheld tax on ROC which would futher decrease amounts actually applied.

Lastly, it remains to be seen what happens for tax year 2005 with the impossible situation of CRA now "legally" taxing ROC. I certainly am not taking any bets on how this can be unraveled under current US tax forms and law. I would believe any ROC now "legally" taxed by CRA will be lost as a form 1116 input just as it was in past years when it was "illegally" taxed.

I truly get tired of the misinformed (or those intent on misleading) dragging out the EXCUSE that these taxes are an offset ... they might be and the amount could be quite insignificant for taxable accounts.

Its certainly does not excuse the tax grab Canada has made on US investors and taxation on the US sheltered accounts which are either tax exempt or tax deferred and which the US government has NEVER contemplated. Of course any such tax raid on these accounts have NEVER been DEDUCTIBLE in any manner.

In closing, for taxable accounts, even if the offset was 100%, for me I look at the investment NET yield, and as of last Q 2004 - first Q 2005 US investments are much more attractive.

Everyone has to make their own decisions based on their circumstances, risk tolerance, preferences and accurate information .... there is no reason to spread the panacea of tax offsets which simply obfuscates without informing.

For any affected, I strongly urge your engagement of a competent US tax CPA.

LTBH
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