Foreign Tax Credit
Dealing with CRA verification requests, calculation disputes, or client frustration over rejected claims? You're not alone. Custom-written for CPAs.
Dean Smith
The Foreign Tax Credit eliminates double taxation for clients with foreign income, but CRA verifies nearly every claim and frequently miscalculates the result. Learn the pooling formulas, sourcing rules, and verification requirements to handle FTC claims confidently and defend your work when challenged.
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ABOUT THE COURSE
This program walks through the complete Foreign Tax Credit calculation from start to finish. You'll learn the pooling formula structure, how to classify business versus non-business income, when and how to source expenses against foreign income, and the country-by-country calculation requirements. The course covers common scenarios including partnerships, LLCs, rental properties, and capital gains across multiple jurisdictions.
You'll also master the practical skills that matter most: assembling proper documentation for CRA verification, handling timing mismatches between foreign and Canadian tax years, identifying when to file objections, and communicating complex calculations to clients. By the end, you'll have both the technical foundation and practical strategies to handle FTC claims efficiently.
What's Inside the Free Preview
Preview Presentation
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Foreign Tax Credit: Complete Guide for CPAs
Plus 3 more comprehensive guides & articles covering practical strategies and real-world applications
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Foreign Tax Credit
Course Syllabus
Foundations & Core Mechanics
Master the fundamental concepts, formula structure, and calculation methodology
Introduction and Overview
- Why the foreign tax credit matters for eliminating double taxation
- The complexity of FTC rules and abuse prevention measures
- Common misunderstandings in practice
- CRA audit frequency and verification procedures
- Impact on practice workflow
The Foreign Tax Credit Formula
- Overview of the basic FTC formula
- Understanding each component and its role
- How the limitation is calculated
- When each element of the formula applies
Basic Rules and Fundamental Concepts
- Business versus non-business income classification
- Country-by-country calculation requirements
- Understanding source concepts
- Net foreign income determination
- The limitation mechanism
The Pooling Concept
- How pooling works in the FTC system
- Segregation requirements by income type
- Country-by-country considerations
- Applying the formula to pooled amounts
Source Determination
Navigate the complex rules for determining foreign source income and expenses
Determining Foreign Source
- Principles for determining source
- What needs to be sourced and when
- Foreign source income without foreign tax paid
- Treaty-exempt income considerations
Sourcing Rules by Income Type
- Employment income sourcing
- Investment income (interest, dividends, royalties)
- Real property income (rental and capital gains)
- Pension income
- Capital gains (general rules and exceptions)
- Business income sourcing principles
Sourcing of Expenses
- Why expense sourcing matters
- Common items requiring sourcing
- Impact on net foreign income calculations
- Tax return presentation issues
Business versus Non-Business Classification
- Canadian classification versus foreign treatment
- Partnership scenarios and flow-through considerations
- US LLC treatment and classification issues
- Modifications required for Canadian tax rules
- Information gathering challenges
Flow-Through Entity Complications
- US LLC and other flow-through entities
- Differences in Canadian and foreign treatment
- Share income classification issues
- Controlled foreign affiliate considerations
Critical Formula Components
Deep dive into each element that determines your final credit amount
Use It or Lose It Principle
- No carryforward or carryback rules for non-business FTC
- Alternative deduction options
- Planning challenges with capital losses
- Importance of proactive tax planning
- Communication strategies with clients
Canadian Tax Otherwise Payable
- What constitutes "tax otherwise payable"
- Federal and provincial credit interaction
- Ordering of various tax credits
- Differences for corporations, individuals, and trusts
- Impact of donation and tuition credits
- Dividend tax credit interaction
- Planning opportunities
Modified Net Income
- Definition and calculation
- Key deductions that reduce modified net income
- Impact on the FTC limitation
Foreign Tax Eligible for Credit
- What qualifies as an eligible foreign tax
- Taxes that don't qualify
- Refunded foreign tax issues
- Non-calendar year complications
- Estimated foreign tax considerations
Special Applications & Taxpayer Types
Handle unique scenarios across corporations, trusts, and complex structures
Corporate Foreign Tax Credit
- How corporate FTC differs from individual
- Refundable dividend tax on hand implications
- Small business deduction interactions
- Foreign affiliate dividend withholding rules
Section 110.5 Election (Corporations Only)
- Purpose and strategic use of the election
- Mechanics of the election
- Creating or preserving loss carryforwards
- Practical applications
Subsection 20(11) Limitation
- The 15% withholding limitation
- When this limitation applies
- Common excess withholding scenarios
- Controversial applications and planning considerations
Foreign Tax Credit and Income Attribution
- How attribution rules interact with FTC
- Various attribution scenarios under the Act
- Why foreign taxes don't follow attributed income
- Double taxation concerns
- Deduction limitations
Trusts and Foreign Tax Credit
- Allocation rules for foreign income and taxes
- Requirements for claiming FTC through a trust
- Proportionality considerations
Special Considerations and Cautions
- CRA positions on deemed gains
- Untested areas
- Expense deduction impacts
- Planning around special rules
Foreign Accrual Property Income (FAPI)
- FAPI basics in the FTC context
- Controlled foreign affiliate considerations
- When FTC is available
Tax on Split Income (TOSI)
- Claiming FTC against TOSI
- Sourcing considerations
Alternative Minimum Tax (AMT)
- Special FTC rules for AMT
- How calculations differ
- Common issues (or lack thereof)
CRA Compliance & Verification
Navigate CRA audits, documentation requirements, and common pitfalls
Practical Issues and CRA Verification
- Understanding CRA's verification approach
- Documentation requirements
- Evolution of CRA's expectations
- Cost and time implications for practitioners
- Information slip treatment
US Tax Filing Complications
- Timing mismatches between Canadian and US filing
- Extension system challenges
- CRA's approach to pending US returns
- Notice of Objection strategies
- Managing the verification process
Common CRA Calculation Errors
- Frequent areas of dispute
- Net foreign income calculation differences
- Program limitation issues
- Special reporting challenges
- Treaty considerations
Problematic Foreign Jurisdictions
- Countries with non-calendar fiscal years
- Extension and timing issues
- Pro-ration requirements
- Estimation challenges
Exchange Rate Considerations
- Translation principles for foreign income and tax
- Average rate versus transaction-specific rates
- Timing and methodology
Advanced Strategies & Practice Excellence
Achieve mastery with myth-busting insights and client management best practices
Common Myths and Misconceptions
- Myth #1: Individual item-by-item FTC calculation
- Myth #2: Reasonableness test application
- Myth #3: Mandatory allocation to each income item
- Myth #4: CRA calculations are always correct
- Myth #5: Small amounts aren't worth objecting
- Myth #6: 90-day objection deadline is absolute
Client and Practice Management
- Managing client expectations
- Communicating FTC complexity proactively
- Handling CRA challenges effectively
- Practice efficiency considerations
- Dealing with client dissatisfaction
Conclusions and Key Takeaways
- Summary of major challenges in FTC area
- CRA verification as a practice reality
- Strategic approach to objections
- Best practices for practitioners
Meet Your Presenters
Michael Cadesky
Michael Cadesky is the managing partner at Cadesky Tax and a committed contributor to the tax and accounting professions since 1980, earning the title of Fellow from CPA Ontario. He is a past governor of the Canadian Tax Foundation, past chair of STEP Canada and STEP Worldwide, and past chair of the CPA Canada Tax Committee for Small and Medium-Sized Enterprises. Michael is also the co-author of 11 books on tax subjects and the author or co-author of numerous papers and articles on Canadian and international taxation.
Dean Smith
As the President of Cadesky U.S. Tax Ltd., Dean has been providing U.S./Canada cross-border planning and compliance for over 30 years. He assists private clients with their personal, corporate, and estate planning needs taking into account the unique challenges of integrating two independent tax systems.
When can I access the course?
Immediately upon purchase. All course materials are available on-demand, allowing you to start learning right away.
How long do I have access?
You have 1-year all-access to the course materials. Watch and review the content as many times as you need, at your own pace.
Does the course provide CPD?
Yes. Upon completion, you will receive a verifiable CPD certificate indicating all instructional learning hours and required details.
What's included in the course?
Full video recording of the seminar, plus slides with detailed notes for your reference. Additional resources may be included.
Can I watch on any device?
Yes. Access the course from your computer, tablet, or phone — any device with internet access.
Guides & Articles
Foreign Tax Credit in Canada: The Complete CPA Guide to Avoiding CRA Denials
Comprehensive guide covering all aspects of foreign tax credits
How to Calculate Foreign Tax Credit in Canada
Step-by-step calculation methodology and formulas
Foreign Tax Credit Expense Allocation
Proper expense sourcing and allocation techniques
How to Handle CRA Foreign Tax Credit Disputes
Objection strategies and dispute resolution tactics