Is the US tax paid by a Canadian-resident taxpayer on the income (which also is foreign accrual property income) of an LLC which is owned by it (and is a controlled foreign affiliate) considered to be foreign accrual tax in respect of the LLC?
After responding that the US tax paid by the taxpayer would not qualify as FAT, CRA went on to note that any amount included under s. 91(1) in respect of the FAPI would be considered income from sources in the US for purposes of ss. 20(11) and 126(1), so that an individual taxpayer could deduct under s. 20(11) any portion of the US tax paid for the year in excess of 15% of the s. 91(1) income inclusion. "Any excess [i.e., the 1st 15%] will be eligible for a foreign tax credit under subsection 126(1) and any of the excess US tax paid that cannot be utilized by the foreign tax credit may be deducted from income pursuant to subsection 20(12)."