This is a multi-part message in MIME format.
---------------------- multipart/alternative attachment
David,
I'm a dual US/Canadian citizen Cdn born doctor interested in returning to
Canada for the final few years of my practice life. Family, malpractice
insurance, HMO's and fresh opportunity in Canada all motivate this.
My US invesment income will be taxed in Canada once I re establish
residence which appears to push virtually all of my Canadian earned income
into the top tax bracket. Is there a way to avoid this?
Canadian friends set up Professional corporations but I'm told I would
need to report this on my US return quarterly as foreign owned corporate
income which sounds onerous, maybe impractical.
Am I right that my 401K and IRA would not be taxed by Canada until I start
making withdrawls?
I suspect there are others in this circumstance. Any suggestions appreciated.
Thanks, TXXXXXXXX
=============================================================
david ingram replies:
Not a lot of doctors coming back, but some and that is good news for Canada. The Malpractice insurance is the big thing with some doctors telling me that their proper malpractice insurance premium is as much as they grossed in their practice last year. West Virginia seemed to be hit the worst and when CNN did their story on it, they used a hospital that my brother in law practices in. Clo9se to home as they say!
Whatever you do, you do NOT want to jump into a Canadian Corporation. In fact, there are few medical doctors, dentists, lawyers and accountants who should be incorporated. The problem is that it penalizes them in the early years because they cannot make their Canadian Mortgages deductible when incorporated. See www.centa.com and read the November 2001 Newsletter.
In your case, we would have to file a form 5471 to the US government every year for your corporation. Your accounting costs triple. And, failure to file the Foreign corporation 5471 bears a penalty of $10,000 for the first 90 days and $10,000 a month after that. Ouch!
Your US investment income will certainly be added to the top of your income and taxed at the highest bracket. What will happen is that your earned income will be taxed first in Canada and then in the US. The US will allow a credit for the tax paid to Canada on any income over $80,000 US. we will exempt the first $80,000 on form 2555. Because you will have US investment income you will not likely have to worry about any AMT (alternative Minimum Tax) because you will have been paying 10% tax on your interest and 15% tax on your dividends to the US government.
Canada will give you credit for every cent of the tax paid to the US in your circumstances as described.
=================
In a gunfighter approach, if your wife happens to be an American and not Canadian and has to immigrate to Canada we could set up your investments in a five year immigrant trust. This would protect the income from Canadian tax but you would still pay tax to the USA on the income from the trust. A Canadian citizen does not qualify.
I am one of the few people who does both income tax and immigration work (39 years). I would be glad to help if needed.
Goto www.centa.com and read the US/Canada Taxation section. It is about 27 pages of stuff aimed mostly at US citizens living in Canada and will give you a lot of insight. Note that I do not mention immigrant trusts there.
David Ingram's US/Canada Services
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Res (604) 980-3578 Cell (604) 657-8451
(604) 980-0321
New email to [email protected]
www.centa.com www.david-ingram.com
Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader & the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent financial, or real estate planner or advisor & appropriately qualified legal practitioner, tax or immigration specialist in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
Be ALERT, the world needs more "lerts"
This from "ask an income tax and immigration expert" from www.centa.com or www.jurock.com or www.featureweb.com. Canadian David Ingram deals daily with tax returns dealing with expatriate:
multi jurisdictional cross and trans border expatriate problems for the United States, Canada, Mexico, Great Britain, the United Kingdom, Kuwait, Dubai, Saudi Arabia, South Africa, Thailand, Indonesia, Egypt, Antarctica, Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK, GB, American and Canadian and Mexican and any of the 43 states with state tax returns, etc.
Alaska, Alabama, Arkansas, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico,New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon. Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, West Virginia, Wisconsin, Wyoming, British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec City, New Brunswick, Prince Edward Island, Nova Scotia, Newfoundland, Yukon and Northwest and Nunavit Territories, Mount Vernon, Eumenclaw, Coos Bay and Dallas Taxman and Tax Guru Your name has been added to our email list because of an enquiry we have received, we may not answer your question but
another similar question will be as we lump them.
You may find more answers at www.centa.com
David Ingram of the CEN-TA REALTY Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
(604) 980-0321 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
---------------------- multipart/alternative attachment
An HTML attachment was scrubbed...
URL: http://www.centa.com/CEN-TAPEDE/centapede/attachments/4d248bb0/attachment.htm
---------------------- multipart/alternative attachment--
What's Related