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Form 1042-s - taxable on canadian return?

#1

I need help…thought this would be quicker than calling CRA:-) My client received an inheritance from his step mother’s Estate. It came in through an IRA (USA) . The amount on his 1042-S is Income Code “15”, Gross Income $66,531, Tax Rate 15%, $9,980 withheld. I’m just not sure if I have to report this on his tax return since it’s an inheritance and it has already been taxed.
Thanks in advance:-)

#2

Timing - I just started on an Alter Ego Trust return and have also got a T1042-S and don’t know what to do with it.

#3

I would confirm that it has been taxed in his mother’s estate as I had one of these a few years ago and made the same assumption - that it had been taxed in her mother’s estate. It hadn’t and caused a huge mess. I had to amend her US and Canadian returns to report it and it was a big number with lots of taxes owing even after withholdings. He may need a 1040NR himself actually. Mine was a US citizen so had to report it on her normal US 1040.

#4

@paul

T1 Personal Income Tax Returns require world wide income to be taxed. So all foreign income needs to be reported on the Canadian Tax Return per the Canadian ITA and per the Tax Treaty T+C of that country.

Ok… Can’t reply when I am sleep deprived and working on fumes…Also info about trust income was posted after my reply was being composed.

Gifts of cash are tax free.
Gifts of property are taxable.
Slips issued are taxable.
Slips are taxable.
Report as foreign income on the applicable form. Claim foreign tax.

  • File T1 with foreign slip + foreign taxes withheld
  • File 1040 NR.
  • After 1040 NR is assessed, send copy of T1040 NR + assessment with T1 2018 Adj and cover letter send letter to CRA ITSO or whoever does the foreign workload for your TC (Tax Centre) to ask for best calculation.

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/amounts-that-taxed.html

Property Inheritance
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/line-127-capital-gains/shares-funds-other-units/identical-properties/property-you-inherit-receive-a-gift.html

#5

The fact that the payor happens to be a trust estate has got nothing to do with anything, and is a red herring.

THE GENERAL RULE IS THAT ALL WORLDWIDE INCOME IS TAXABLE, INCLUDING THIS USD_$66,531 (FTC for the $9,980)

There is no evidence in the OP that indicates in any way at all that it has anything at all to to with a gift, or capital inheritance distribution, or payoff for a drug deal, or…

#6

I think that to avoid a penalty, I’ll file with the slip and adjust after if necessary…that way all be bases are covered and its easier than not claiming and adjusting upwards after.
Thanks everyone:-) …almost done:-))))

#7

Thanks…I will report it…and thanks for the last comment…lol