Foreign tax credit for Partnership (with non-IRA apologies)
My apologies if this non-IRA question is too far off-track.
While I’m here on this board, I thought I’d toss this out…
I’ve been looking for a way to claim foreign tax credit within an investment club set up as a partnership, to recover withholding tax charged by the Canadian govt. The IRS provides forms for individuals and corporations to claim the credit (F1116 and F1118 respectively).
However, I can find no IRS forms or information at all on the IRS site relating to partnerships claiming the credit. Weird, because the IRS does discuss the partnership structure for investment clubs.
It’s not practical to use the corporate structure, as this involves another layer of taxes (corporate).
I’d be immensely appreciative if anyone on this board with experience with partnerships would offer any advice or comments…
Thanks…!
Permalink Submitted by [email protected] on Thu, 2008-05-01 17:34
[quote=”[email protected]“]My apologies if this non-IRA question is too far off-track.
While I’m here on this board, I thought I’d toss this out…
I’ve been looking for a way to claim foreign tax credit within an investment club set up as a partnership, to recover withholding tax charged by the Canadian govt. The IRS provides forms for individuals and corporations to claim the credit (F1116 and F1118 respectively).
However, I can find no IRS forms or information at all on the IRS site relating to partnerships claiming the credit. Weird, because the IRS does discuss the partnership structure for investment clubs.
It’s not practical to use the corporate structure, as this involves another layer of taxes (corporate).
I’d be immensely appreciative if anyone on this board with experience with partnerships would offer any advice or comments…
Thanks…![/quote]
I have seen many partnerships pass through the foreign tax credit info on their returns. Therefore, I recommend that you print out the form 1065 instructions and read them carefully.
CPA491
Permalink Submitted by Bruce Steiner on Fri, 2008-05-02 18:11
It’s up to each partner to claim the credit or deduction for his/her share of the foreign taxes.
Permalink Submitted by [email protected] on Fri, 2008-05-02 18:18
[quote=”[email protected]“]It’s up to each partner to claim the credit or deduction for his/her share of the foreign taxes.[/quote]
Yes I agree, using the data provided to them by the partnership either on and/or accompanying the K-1 provided to them by the partership.
Permalink Submitted by [email protected] on Fri, 2008-05-02 18:30
I have a client who has really gotten into managing his own stock portfolio for his IRA, and has had his IRA invest in foreign stocks, with the natural result that some countries withhold foreign tax, even though the stock is held by a tax deferred IRA. But what really bothers my client, is that a stock his IRA holds in a company from France has withheld at the default rate of 25%, and he is trying to figure out how:
a. what might he do to get that lowered if possible, and perhaps more importantly,
b. where he might go to find out withholding requirements of various foreign countries, so that he might take that into account BEFORE making his investment.
Anyone else ever hear of a problem like this, and/or what other’s might be doing if they hold foreign stocks in their IRA??
Of course the practical solution is for him to invest personally in foreign stocks rather than through his IRA.
CPA491
Permalink Submitted by Bruce Steiner on Sun, 2008-05-04 01:58
The U.S.-France income tax treaty, like most income tax treaties, provides for a 15% withholding tax rate on dividends earned in one country by taxpayers in the other country.
Permalink Submitted by [email protected] on Mon, 2008-05-05 15:25
[quote=”[email protected]“]The U.S.-France income tax treaty, like most income tax treaties, provides for a 15% withholding tax rate on dividends earned in one country by taxpayers in the other country.[/quote]
France can and does withhold 25%, unless an US individuals proves his US citizenship, per the procedures set forth on the French Embassy website, to get a refund of only 10%:
http://www.ambafrance-us.org/intheus/tax/007us.asp#withholding
See Q&A #13.
But back to my original question about an IRA (not an individual) holding stock in a French company and receiving dividends reduced by 25% French withholding: The IRA (not an individual US citizen) is the owner. I see no procedures (French and/or IRS) that would allow an IRA to seek a refund. So even if the French refunded the 10% difference to an US citizen, might not the IRS treat that as a constructive distribution from the IRA, with all the problems that might entail?
It is my eccentric client who is driving this, as I personally would simply have my IRA investment portfolio restructured to avoid these problems.