9 January 1992 Income Tax Severed Letter 9128145 - Earned Income — U.S. Resident for Treaty Purposes Only

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Subject: EARNED INCOME-U.S. RESIDENT FOR TREATY PURPOSES ONLY Section(s): 146(1)(c)]

• 5- 912814 D. S. Delorey (613) 957-8953

XXX

Attention: XXX

January 9, 1992

Dear Sirs:

This is in reply to your letter of October 3, 1991 concerning the computation of "earned income" as defined in paragraph 146(1)(c) of the Income Tax Act (the "Act"), by an individual who is resident in Canada for the purposes of the Act but resident in the U. S. for the purposes of the Canada-United States Income Tax Convention, 1980 (the "U. S. Treaty").

In your letter, you set out a set of "assumptions" and ask us to confirm your analysis of the income tax implications arising therefrom. It appears that your enquiry relates to specific transactions, either proposed or completed. Where a transaction is proposed, confirmation of the tax implications arising therefrom should be sought by way of an advance ruling request submitted in the manner set out in Information Circular 70-6R2. Where a completed transaction is involved, the enquiry should be addressed to the relevant District Taxation Office. We offer, however, the following general comments.

Where an individual is considered to be resident in Canada for the purposes of the Act while temporarily living and employed in the U. S., his income for Canadian tax purposes would include any salary or wages derived from that employment. Such salary or wages would form part of his earned income for the purposes of the computations under section 146 of the Act, notwithstanding that he might be considered to be a resident of the U. S. for the purposes of the U. S. Treaty and thus entitled to a deduction under subparagraph 110(1)(f)(i) of the Act with respect to the salary or wages. For a taxation year in which such an individual is no longer considered to be resident in the U. S. for the purposes of the U.

S. Treaty, the amount deductible under subsection 146(5) of the Act could be based in part on undeducted premiums paid to an RRSP after 1990 while living and employed in the U. S. and "unused RRSP deduction room" attributable to his U. S. employment income. Such undeducted premiums and unused RRSP deduction room would also be relevant for the purposes of the computation under subsection 204.2(1.1) of the Act.

The above comments reflect an expression of opinion only and are not binding on the Department, as explained in paragraph 21 of Information Circular 70-6R2. We trust, however, that they are of assistance.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate