T3 Box 34 "Investment" for foreign non-business income

Hi, thank you for using Intuit ProFile Community

It is true section 20(11) and 20(12) deductions are not allowed for foreign tax paid on trust income. ProFile unfortunately does not impose restrictions based on tax or treaty rules. This would be a great request for the Send feedback app in the ProFile help menu. The warning is to alert preparers to review the rules and adjust as required.

 Profile was requested by users to not allow section 20(12) and 20(11) deductions as occurred when the income was reported on the FTC screen as investment income. The product development team decided to move the T3 foreign income and foreign tax to the other column to prevent inadvertent claims for the deductions which had occurred and were denied by CRA. This change was implemented a couple of years ago without any issues since.

I apologize for the inconvenience but hope this helps

If I enter $100 in box 15 and $25 in box 16 on a T5, this is what happens.  T2209 shows a foreign tax credit coming in at $15 on line 43100.  The net foreign non-business income on line 43300 is then $90 (=100-10).  A 20(11) deduction (which I think is questionable) of $10 is claimed at T1 line 23200.  That makes sense.

If enter $100 in box 25 and $25 in box 34-investment on a T3, this is what happens.  The foreign tax credits screen changes the category to other.  T2209 shows a foreign tax credit coming in at $25 on line 43100.  The net foreign non-business income on line 43300 is $100.  There is no 20(11) claim.  This does not make sense.  Should it not have line 43100 at $15 and line 43300 at $90 as per the T5 treatment since the limit is 15%?  The extra $10 cannot be claimed under 20(11) and is lost as a "voluntary contribution to a foreign government".

Hi, thank you for using Intuit ProFile Community

The $90 amount is minus the 20(11) and/or 20(12) deduction(s) for entries on the T5 slip screen. ProFile does not assess the eligibility for these claims and preparers must adjust the claim for foreign tax and deductions as required.

The treatment for T3 slip does not allow deductions so there is no reduction and thus the foreign income is $100. For the tax, ProFile does not adjust for treaty rules or tax laws. The preparer must enter an amount for foreign tax based on their best judgement.

Hope this helps

Hi Duncan,

The CRA Income Tax Folio S5-F2-C1, Foreign Tax Credit section 1.22 states:

"It should be noted that only foreign income or profits tax paid by an individual (which includes a trust) in respect of foreign-source income from a property, other than real or immovable property, which is in excess of 15% of such income as calculated under the Act (that is, the gross income under the Act, not the income net of foreign taxes), is deductible under subsection 20(11)."

Therefore, when preparing a T1 personal tax return, and if the individual has received a T3 (Statement of Trust Income Allocations and Designations) slip, and the software automatically calculates a s.20(11) deduction before calculating the FTC, is this not correct?

Would the limitation of not claiming a s.20(11) deduction only apply to T3 Trust income tax returns?

Hi, thank you for using Intuit ProFile Community

If a section 20(11) or 20(12) deduction is taken for tax paid on T3 income, the CRA will refuse the deduction. That is why ProFile is set up to prevent inadvertent claim for the deduction(s). The reference for this is section 9 of IT201r2 available here

Hope this helps