Principal Issues: Assuming that subsection 75(2) applies notwithstanding proposed paragraph 75(3)(c.2) and that income is attributed to a resident of Canada from a non-resident trust which is not deemed resident under current 94(1)(c) (because of the exemption for the first 4 years after becoming resident in Canada), will the taxpayer be entitled to a deduction under 20(11) and\ a foreign tax credit under 126(1) in respect of the foreign taxes paid by the non-resident trust?
Position: Question of fact but assuming that:
•the taxpayer is resident in Canada;
•the taxpayer pays the foreign (US) tax directly because of the US tax rules governing grantor trusts;
•the trust is not resident in Canada under common law principles and will not be deemed to be resident in Canada under 94(1)(c) during the "immigrant period" -typically the 4 years following immigration when the taxpayer has not been resident in Canada for 60 months before the end of the tax year (and assuming, contrary to expectations, that 75(2) will apply notwithstanding proposed 75(3)(c.1));
•the income earned by the property is on US marketable securities which is not taxable Canadian property or real property;
a reasonable argument can be made that the taxpayer would be entitled to a deduction under 20(11) for amounts in excess of 15% of the foreign taxes paid and under 20(12) for any portion of the 15% so desired. To the extent that the taxpayer does not claim a deduction under 20(12), a foreign tax credit would be allowed under 126(1) in respect of the 15%
Reasons: Questions such as these are highly fact dependant; however, this position is consistent with the position taken in 2007-023370 and 2002-0143605
