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Pengrowth Energy Corporation Message Board

  • frank100_20012002 frank100_20012002 Nov 1, 2005 4:55 PM Flag

    Canroy Tax Question

    When Canada withholds taxes of US citizens who hold canroys, is the amount withheld considered deductable on US federal income tax returns? Is the correct term "tax credit"? Any help is appreciated. Thanks

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    • YES. The tax witholding on the dividend portion of the dividend is eligible to claim as a foreign tax credit.

      The tax witheld on the ROC portion is not eligible but people routinely claim it anyway and the IRS is sloppy enough to let it slide. Whether you want to go there is up to you. All I know is that it is a waste or time to try to get the money back from Canada. To complicate life PGH is the only Canroy that claims to be a partnership and they will send you a K-1 form at the end of the yr.

      See and get some professional tax advice.

      • 1 Reply to easy_was_mail
      • If you deduct the ROC from your cost basis then the ROC portion is not income and therefore nontaxable.
        The paperwork to convey this fact to the IRS would raise all kinds of red flags, so just apply the tax credit to the entire distribution. I think this would be a wash with the irs and if they messed with your return they'd take nothing.
        This all changes if you don't adjust your cost basis.
        Of course, PGH used "depletion" rather than ROC in its last 10K, I think TurboTax handled that much better than ROC.

    • NO!!!!!!!!!!!!Talk to your tax guy. Small investor are screwed. Question is...why would a U.S. tax payer get a "tax credit" on a foreign Gov. investment??? Talk to your tax guy, this an't a fair game. This issue was beat to death over a yr. ago and, when the ko-nuck's started taxing retirement accounts people left.

    • There are two major questions. Not only have they not been answered on any message board but at least one has not been recognized. The minor question is whether the 15% witheld on ROC will be eligible for foreign tax credit on Form 1116 after the recent Can. legislation. I suspect not, but would appreciate some insight. The larger question is in regard to Form 1116 instruction sheet page six column 3 (repeated on the extended version Publ. 514). Oversimplifying, those of us with a large percentage income from Canroys must multiply such income by 0.4286 which results in only 42.86% of tax witheld eligible as foreign tax credits. These instructions would seem to lead to contradictions. Compare a $600 credit for which Form 1116 is not needed with a $600 to $1200 tax witheld. Any discussion of this would be appreciated.

      • 2 Replies to normandeno
      • Excerpt from the Acclaim Third Quarter Results (AE-UN.TO)

        " For US tax purposes, Acclaim has also recently sought and received an
        opinion, that where units are held in a taxable account, we believe the full
        amount of all withholding tax should be creditable for U.S. tax purposes in
        the year in which the withholding taxes are applied."

        Hope this helps... other trusts may or may not have made the same effort to clarify the issue.


      • The tax credit reduction (.4286) only applies to foriegn qualified dividends. And $20,000.00 in foriegn qualified dividends and capital gains are exempt if your total income falls below certain parameters.

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