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My question is: Applicable to both US and Canada
QUESTION: My question has multiple parts and my situation is a bit =
confusing but I am hoping you can provide some assistance.=20
A. I am looking to sort out my taxes for both the US and Canada. I am a =
Canadian and own a condo in Burnaby, which I turned into a rental =
property after I took a job in the California under a TN Visa starting =
March 2002 that ended March 2003 whereby I returned to Canada. I own =
the property with my brother but he is not on title. My brother acted as =
my agent and filled out an NR6 form. I did my 2002 US Fed and California =
state taxes but did not include the rental income on my taxes since my =
brother was my Canadian agent. (I am worried that I should have declared =
this in the US and want to fix it.) The property was not rented for =
three months during that time so I assume I can write some off those =
expenses as well if this is the case. Any suggestions?
B. I then returned to Canada March 2003 and assume I would just declare =
the income from the property and other sources on my Canadian personal =
income tax starting in April 2003. I then confused this simple plan by =
returning to the US as a visitor in June and got married to a woman from =
New York this past November. I met her while on my TN Visa. We filed =
for my permanent residency mid December and it came through this March. =
Since I knew I was staying in the US my brother filled out the NR6 forms =
for the rental property starting January 2003. I thought I could just =
do my Canadian taxes for the income on the property from April 2003 =
until December 2003 since that was when my filing for US residency =
occurred and not worry about US taxes for the property during this time. =
My only other earned income was from an RRSP, and cash payout from a =
company I previously worked for plus a shareholder loan payback which =
occurred before I returned to the US and married a US citizen. I assume =
that I would also file my US and California State taxes for the rental =
property under the NR6 (for March 2002-March 2003) for the Canadian =
rental property. But, since I am now in NY state and married, can and =
should I file joint taxes with my wife here. We did my wife's Federal =
taxes at an H&R Block where the preparer mentioned that it may be in our =
best interest to file jointly and we can amend her federal return before =
April 15th. If also assume I would do NY and California state tax as =
well as the US Federal. =20
=20
C. The 2002 and partial 2003 NR6 property taxes were paid for by my =
agent while I was back in Canada and was told (by Customs Canada) that =
I should be eligible for a refund if I fill out a Section 216 (4) before =
the end of June 2004. Also I was told that my agent needed to file a NR4 =
Statement and NR4 Summary before the end of this March for me to be =
eligible for the refund. My agent is just as confused as I am over this =
on what he needs to do at specific times. If this is the case then I =
end up paying tax in each country on the single rental property and wait =
for one of the governments to send me a refund, if I am lucky. I feel =
that I must have this wrong.
Also is it possible to have my brother claim the income from the =
property even though he is not on title since we jointly hold the =
mortgage so we can avoid this whole NR6 paperwork in the future? We did =
not put him on title to avoid the expense but it may be a better =
solution for us. One last note is that we hope to have this condo sold =
this year but it would be less than I originally paid for it so is there =
anything I should keep in mind for future tax implications.
I know this might be beyond the scope of a "free answer" and I =
appreciate your time. I originally wanted to do my taxes with a =
software package but I am concerned my situation will not fit a standard =
package and I am confused enough already. I am feeling like it may be =
in my best interest to have a professional deal with my taxes this year =
before I mess it up even more and is this something you can handle for =
me?
Thanks in advance, XXXXXX
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david ingram replies:
a: As a resident of the USA and California, you were required to =
report the rent on your 2002 US 1040 and California 540NR. You likely =
had a rental loss and it would have reduced your California and US =
federal taxes. However, even if you made a profit, you (we) should =
amend and correct those two returns.
b: You have been in the US more than 183 days plus the days before in =
2002. You are clearly a taxable resident alien of the US for 2003 for =
income tax purposes with or without your marriage.
You should have filed a joint 1040 with your wife and a joint New York =
return with your wife. You should also file a 540NR for California. =
Your brother has four days to get his NR4 summary and supplementaries in =
or he will have a $200 or $800 fine ($800 if he missed the 2002 filing =
as well.) I guarantee that the CRA will catch up with him if he filed =
and signed an NR6 and has not filed the NR4 return. It sometimes takes =
them 3 years to catch up but they Always do and the fines are severe =
plus 25% of the gross rent with no deductions for expenses. Get them =
done NOW. He can get them done at our office if necessary. Have him =
call me at (604) 980-0321.
You cannot amend your wife's return until we know the rental income from =
your condo because it has to go on that return as well.
If you pay tax to Canada for the rental, it means that there is a =
profit. If so, you will get a credit for the tax paid to Canada on any =
tax owing to the US.
You are a non-resident of Canada for the whole year. Your brief two =
month sojourn in Canada is NOT a residential time as you describe it.
You and your wife should send me her New York and US Federal return and =
your W2 from the US and your T4RSP for the RRSP withdrawal and whatever =
other information you have as soon as possible. For the record, I would =
likely not do them until May although I would likely file a proforma =
Canadian return before April 30th.
For the US, the H & R Block person was incorrect about the April 15th =
date.There "is" a prohibition about changing from a joint return to =
separate returns after April 15th, but it is perfectly okay to change =
from separate returns to a joint return after April 15th. It will be =
cheaper and easier to fix up in May when the rush is over.
However, the NR4 has to be in by March 31st.
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Answers to this and other similar questions can be obtained free on Air =
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David Ingram's US/Canada Services
US/Canada/Mexico Tax Immigration & working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Calls accepted from 10 AM to 10 PM 7 days a week
Res (604) 980-3578 Cell (604) 657-8451
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[email protected]
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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 =
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practitioner, tax or immigration specialist in connection with personal =
or business affairs such as at www.centa.com. If you forward this =
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