Canadian, currently with US green card living in Canada

[ziggy1465]

My wife is a Canadian with a US green card living in Canada.  We're both retired and she has US SS and a US retirement (CalPers) income.  Currently we file in both Canada and have filed jointly in the US.  However, my  wife will be getting a large Canadian capital gains distribution.  Does that need to be declared in the US or is it only my world-wide income that needs to be declared in the US.  

[ClarissaA1 · Accepted solution]

You and your wife both need to report your worldwide income on a US tax return.  You are a resident, for U.S. federal tax purposes, if you are a lawful permanent resident of the United States at any time during the calendar year. This is known as the "green card" test.  The IRS definition of tax resident for a green card holder does not require presence on U.S. soil.  If a green card has been issued to your wife, and not terminated by an immigration court or USCIS or voluntarily renounced by the green card holder in writing to USCIS, she is a U.S. tax resident, regardless of where you live.  

US Tax Residency - Green Card Test 

US Citizens and Resident Aliens Abroad  

In order to avoid double taxation, you can claim the foreign tax credit on your US return for taxes that are paid to Canada on the Canadian capital gains.  
Foreign Tax Credit