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Taxpayer is US citizen living in France. Income includes French

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Taxpayer is US citizen living in France. Income includes French sourced pensions which have been reported on US tax returns. On past US returns, foreign tax credit used to offset the French taxes paid on pensions. Question - for 2010 a new Protocol (article 18) to the US/French tax treaty went into effect and according to various readings "French pensions received by US citizen living in France are taxable only in France and not in the US" - does this mean that for 2010 the French pension amounts do not have to be reported on the US tax return or should the amounts be reported and foreign tax credit used to offset the French taxes on the pensions?

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It means that you will not be paying tax on the French pensions on your US tax returns. I would caution you, however, to disclose the income by entering the French pension amount in the (a) column and writing a zero in the (b) taxable column.Then you cannot be criticized for failing to disclose the income. Get a copy of the treaty for your files in case the matter is ever questioned.The foreign tax credit will not apply at all due to the treaty and should not be a part of your return.



Edited by Charles Greiner on 1/22/2011 at 5:20 PM EST
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