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To: Paul Senior who wrote (26592)	4/19/2007 5:08:56 AM
From: Elroy Jetson	Respond to of 78958

I think the basic deal with Form 1116 for Foreign Tax Credit is you don't get to take the full tax credit if your AGI after deductions is too small. You get to deduct the smaller of: 1.) Your Foreign Tax paid; 2.) Foreign Income / AGI minus Deductions * IRS Tax before Tax Credit .

To: Paul Senior who wrote (26592)	4/23/2007 5:44:06 PM
From: Tapcon	Respond to of 78958

>>>"The problem in holding these trusts in an IRA is that the canadian withholding of 15% is lost. So you lose 15% of the dividends to thin air. But if held in a taxable account, that foreign tax withheld is a US tax credit." For me, I've found that not to be true.<<< I too have found this not to be true. I spent at least 60 hours this tax season researching the unbelievably arcane regs relating to foreign tax credit claims between US and Canada. From my understanding, Paul is correct on several points he raised: you can either claim the Canadian foreign tax as an expense or a credit. If an expense, you claim it through a Schedule A deduction. Fairly easy, but you only get cents on the dollar, depending on your tax bracket. If you try to claim it as a foreign tax credit, God help you. For openers, I have read that Turbotax will not handle it in most cases (above the threshold of a "quick" form). Two other problems as I understand it: to claim the foreign tax credit, you have to write it off against other foreign income, OF THE SAME CATEGORY, of which there are something like six, such as "passive", "general limitation", etc. Cross-border tax experts disagree on what types of income fall into which category. The other point, other than the Alternative Minimum Tax issue raised by somebody else on the thread, is that the foreign tax credit, I believe (my eyes had long since glazed over on the whole matter)the tax credit is also affected by the ratio of your foreign income to world income.