Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Tommaso who wrote (60865)	3/17/2006 10:08:43 AM
From: lzc	Read Replies (1) \| Respond to of 206319

This post on claiming credit for Canadian withholding tax paid on investments held within an IRA may be of interest. Additional posts on the tread continue the discussion. Re: FDG dividends-IRA by: taxsniper Long-Term Sentiment: Buy 03/16/06 06:59 pm Msg: 39185 of 39224 Hey, It's the TaxSniper again. Been around and accumulating (carefully). Adding to my IRA and taxable positions by the way. So, for your answer to the mythical IRA question. YES! ANYTIME you take TAXABLE distributions for ANY reason and you PAID taxes to Canada, you should claim the credit on your return for that year. PERIOD. There is nothing SPECIAL about this. The tax treaty with Canada has nothing to do with IRAs. When an Individual owns stock in his IRA, his custodian actually owns it for his benefit under an Arrangement for his Retirement. Congress has enacted legislation to allow certain IRAs either tax-free (Roth) or tax-deferred (traditional and Simple, for example) status if they meet certain contractual requirements. They are just contracts between two "people" and have nothing to do with Canada. As far as the treaty is concerned, every dollar of tax paid to Canada, even if held under an IRA, is tax paid to Canada. As far as claiming it as a credit, you can only claim the credit against income that you claimed as income. Thus, for taxable distributions which you claim as income, say, on your 2005 tax return, to the extent that you allocate the distributions as having first come from foreign dividends (which is your choice), you may claim up to that amount of foreign tax credit. Example, you take a minimum $10,000 distribution from you traditional IRA. In the IRA, you held FDG last year and "received" $5000 in unit distributions which are considered dividends by the IRS. You choose to treat the money you withdrawal from the IRA to be the $5000 of dividends and $5000 of other capital (in cash terms $4250 directly from the distributions and $5750 from other capital because of the withholding). This does not change the treatment for the income tax because the legislation requires you to treat ALL income from the IRA as ordinary even if it would have been qualified dividends, capital gain, whatever, otherwise. That part is a right you give up in exchange for tax deferred status of the account all along the way. However, the FACT is YOU paid foreign income tax (NOT your IRA because your IRA is NOT a separate legal "person") and you are entitled to claim the credit. So in our example, the $5000 in distributions had $750 withheld, the full $750 is claimable this year. You cannot carry these forward inside your IRA. You cannot claim these for nontaxable IRAs. Bottom line: If you can claim the income, you can claim the credit. God I hope this finally helps answer these questions. The TaxSniper