INCOME TAX |
Income Calculation |
Deductions |
Taylor v. Canada
T-3058-90
Rouleau J.
20/7/00
6 pp.
Appeal from Tax Court's decision upholding Minister's decision disallowing foreign tax credit claimed by plaintiff for 1988 taxation year--Plaintiff, United States citizen, resident in Canada--In 1988 United States income tax return disclosing world income as U.S. citizen, including severance payment from U.S. Navy, Canadian wages, dividend from Canadian corporation--As U.S. citizen, allowed to deduct mortgage interest from income, reducing U.S. tax to US$660.64--Claimed foreign tax credit of $813.19 (US$660.64) in Canadian income tax return--Appeal dismissed--Under Income Tax Act, s. 126(7)(c)(iv), U.S. citizen residing in Canada could not claim full foreign tax credit earned by virtue of tax paid to U.S. because foreign income tax return included dividend earned from Canadian source--Disallowed because income not attributable to source outside Canada--Plaintiff should have filed income tax return in Canada; taxes payable in Canada attributable to dividend income could then be claimed as credit in U.S. tax return under Canada-U.S. Income Tax Convention (1980), art. XXIV, s. 4(b)--Under s. 4(a) Minister obligated to allow deduction from tax in respect of profits, income or gains arising or deemed to arise in U.S.--Since plaintiff's dividend income from Canadian sources, defendant not obligated to credit deduction from Canadian taxes for tax paid, declared in U.S. return--Income Tax Act, S.C. 1970-71-72, c. 63, s. 126(1) (as am. by S.C. 1973-74, c. 14, s. 39), (7)(c)(iv) (as am. by S.C. 1980-81-82-83, c. 140, s. 88)--Convention Between Canada and the United States of America with Respect to Taxes on Income and on Capital, being Schedule I of the Canada-United States Tax Convention Act, 1984, S.C. 1984, c. 20, Art. XXIV, s. 4(a),(b).