Case study 1
Salary abroad and a portfolio that stranded its own credit
The filer employment income carried ample credit while withholding on a foreign share portfolio went unrelieved, and earlier returns had simply netted the two. We separated the income and the tax into their baskets, computed a ceiling for each, and showed the passive credit stranded against a ceiling the portfolio own income could not lift. The work then turned to what could change it, including the composition of the holdings and whether the effective foreign rate brought the regrouping mechanism into play. The engagement produced a basket-by-basket computation and a carryover schedule for the unused passive amount.
Case study 2
Income the filer treated as foreign that was sourced at home
Fees the client regarded as foreign because the payer was abroad turned out to be sourced where the services were performed, which was at home. Sourcing decides both whether income is foreign and which basket it falls in, so the ceiling for the basket involved fell to almost nothing. We re-sourced the receipts item by item, restated the baskets, and carried what could not be used. The engagement produced corrected returns for the open years, a sourcing analysis for each class of receipt, and a record-keeping practice that captures where each engagement is performed.
Case study 3
Carryover schedules rebuilt basket by basket
Several years of returns had tracked unused credit as a single running total, which is not a form in which it can be used. We went back through the filed years, identified the basket each unused amount arose in, and rebuilt parallel schedules showing the year of origin and the remaining life of each amount. Part of the balance proved unusable, because the basket it belonged to produced no ceiling in the years available. The engagement produced schedules that support a claim in any later year, and a written note of the amounts written off and why.
Case study 4
Interest expense allocation that moved both ceilings
A leveraged investment account and an unrelated business loan had been left out of the basket computation entirely. Interest expense is apportioned by reference to assets rather than to the income it produced, so once both loans were brought in, the passive ceiling fell and the active one moved as well. We documented the asset basis used, recomputed each ceiling, and reallocated the credit accordingly. The engagement produced an allocation working paper that can be rolled forward, revised returns for the open years, and a carryover position restated in the baskets it actually belongs to.
Case study 5
Treaty resourcing handled as a basket of its own
The other country taxed income that the domestic rules sourced at home, and the treaty required it to be treated as arising there so that relief could be given. Rather than folding it into the existing foreign income, we placed the resourced income and its tax in a separate basket, computed a ceiling for that basket alone, and disclosed the treaty basis on the return. The engagement produced a computation with the additional basket shown separately, the treaty position set out in writing, and carryover in that basket tracked apart from the rest.
Case study 6
Regrouping tested on a heavily taxed foreign income stream
A foreign income stream of an investment character had borne tax at a rate well above the domestic rate applying to it, while the filer unused credit sat in the passive basket with no ceiling to use it. We computed the effective foreign rate on that stream from the local assessments, established that the regrouping test was met, and moved the income and its tax to the active basket, where a larger ceiling was available. The engagement produced the rate computation supporting the regrouping, the return filed on it, and a restated carryover position.
Case study 7
A Pension Taxed Where the Treaty Did Not Intend
Pension and annuity articles allocate taxing rights differently from employment income, and a flat withholding often exceeds what a return would produce. The alternative filing is elective and has a deadline.
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Case study 8
A Relief That Turned on Days Nobody Had Recorded
Treaty exemption, residence and social security are each decided by a count that has to be evidenced rather than recalled. The engagement builds the record from tickets, rosters and payroll before applying any article.
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