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Withholding on Canadian dividends?

I own stock in three Canadian banks, BMO, CM, and RY. (If you looked at their dividend yield, you'd own them, too.)

The BMO and CM stocks are in my IRA. They pay the dividends like any other dividend, the full amount converted from CAD to USD. I bought the RY stock last year in my taxable account, and they're withholding about 10% for Canadian tax. Huh? I thought that under the US/Canada tax treaty there's no dual taxation. Since an IRA is not exempt in Canada, shouldn't they either take tax out on all of them or none of them?

I asked the broker (Vanguard) who sent me a form answer saying, basically, sometimes they do that, not our problem.

R's, John

PS: I realize I can get credit for it on form 1116, but then my tax accountant will charge me for yet another form.

Reply to
John Levine
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The treaty has clauses that prevent dual taxation. In the case of dividends, Canada will withhold. In your case... the 10% withheld on RY. You must report the dividend on your US return. You can apply for a foreign tax credit to eliminate double taxation. You can elect to deduct the foreign taxes paid on Schedule A in lieu of the credit. The instructions for Line 47 of the 1040 tell you when you may take the credit without the use of the 1116. One of the requirements is that the dividend and foreign tax paid gets reported to you on a 1099-DIV or your broker's Consolidated Statement that contains the 1099-DIV.

Any foreign taxes paid on securities owned inside your IRA is just the cost of doing business. There is no deduction or credit available for any tax withheld on the foreign dividends.

Reply to
Alan

If the foreign tax paid on the dividends of the stock in the taxable accounts are less than $300 if single/MFS, or $600 if MFJ then you can just take the full amount of the credit without form 1116.

Reply to
removeps-groups

Only if all of his foreign source income is from interest and dividends and it is reported on a 1099-DIV or K-1.

Reply to
Alan

replying to Alan, Kai Kahuna wrote: This is not a valid answer to the case as stated as to the investment being held in an IRA where taxes are not with held on US shareholders by treaty. But REIT and CEFs are not exempt from the with holding provision even if held in an IRA. The exemption is supposedly limited to LLCs that trade in Canada either with US symbols like RY a bank or an LLC like ATGFF a utility. The F suffix is an indication of the stock being a foreign stock. some erroneously "assume" the "F" sffix stocks are pump and dump pennny stocks because theyn trade on the OTC and the pinks. I found my way to this thread attempting to find out what the treaty treatment will be on dividends from preferreds. As in the cae of the RY-S.

Reply to
Kai Kahuna

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