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Deduction Under Section 20(11) or 20(12) on Line 232

#1

Does Taxcycle ever allow for a deduction under section 20(11) or 20(12) of the Income Tax Act for foreign taxes paid in excess of the maximum amount permitted as a Foreign Tax Credit?

I have a situation where there is about $500 Foreign income in box 25 of a T3 slip and lets say $250 as Foreign Taxes paid in box 34. The slip is split 50/50 with a husband and wife, and the wife is not taxable. Taxcycle allows the husband (who has net income of about 90,000) a Federal Foreign Tax Credit of 29.88 and a Provincial Foreign Tax Credit of 13.01 (adding up to 42.89). The $82.11 difference between his share of the foreign tax paid, and the foreign tax credits does not show up on line 232. The spouse, has not foreign tax credit (because she is not taxable), and no deduction online 232. A deduction on line 232 would increase his spousal claim.

In the FTCSum screen of their returns (at the bottom of that sheet) the form makes reference to 20(11) and 20(12) deductions, but I can’t figure how to get any amount to ever populate in there.

Is there some type of trick or box that needs to be checked somewhere to get this line 232 deduction to work?

#2

TaxCycle does allow for the 20(11) and/or 20(12) deduction for investment income as well as 20(12) for income from real property, as you can see on the FTC worksheet for the country in question.
However, foreign income tax from a trust cannot be claimed as either a 20(11) or 20(12) deduction per IT-201R2 paragraph 9 ( http://www.cra-arc.gc.ca/E/pub/tp/it201r2/README.html ) which reads as follows:
“While the rules in subsections 104(22) to (22.3) apply for the purposes of section 126, they do not apply for the purposes of subsection 20(11) or (12). As a result, a beneficiary cannot claim any non-business income tax allocated to it under these rules as a deduction from income under subsection 20(11) or (12).”

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#4

Well it really seems as though you are correct Allen :relaxed:

I have read through both IT-201R2 as well as paragraph 11 of IT-506 and they do agree with you, that the deductions can not be claimed by a beneficiary of a Trust. Since all of these Mutual Funds are nothing more than Unit Trusts, I guess those rules would apply to all T3 supplementaries. To check your software, I entered those same amounts, but on a T5 slip using boxes 15 and 16 and Taxcycle did allow the deduction on line 232 for both individuals.

I guess I can use the excuse that I have been using Professional Tax Preparation software for the last 15 years that incorrectly takes that deduction on line 232 (even from a T3 supplementary) so I mistakenly assumed they somehow knew about Canadian tax law. I guess that’s why I’m here now and not there.

Thanks for the enlightenment. :slight_smile: