In response to a query as to whether U.S. income tax paid in excess of the proportionate Canadian income tax rate on U.S. non-investment income may be utilized against U.S. source investment income, CCRA noted that the limit under s. 126(1)(b)(i) is computed on the basis of one basket per country and that "therefore, it is permissible, other circumstances allowing, for 'excess' foreign tax paid on the U.S. non-investment income to be used against U.S. source investment income in calculating a taxpayer's foreign tax credit".
Amounts deducted under s. 20(12) will reduce both the taxpayer's total non-business income taxes paid and the taxpayer's non-business income from the particular country for foreign tax credit purposes.
Where the foreign jurisdiction (e.g., the U.K.) computes taxes other than on a calendar-year basis, CCRA will accept an apportionment of foreign income and foreign taxes based on the portion of income earned during the calendar year.
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