My question is: Applicable to both US and Canada
QUESTION: We will be going to work in the US and would like to buy a
property in canada in our daughter's name. Will this affect our canadian
non-resident status or have any other tax implications.
Your advice is appreciated.
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david ingram replies:
Article IV of the US / Canada Income Tax Convention reads as follows:
Article IV - Fiscal Domicile - (it is the same number in most treaties)
For the purposes of this Convention, the term "resident of a Contracting
State" means any person who, under the law of that State, is liable to
taxation therein by reason of that person's domicile, residence,
citizenship, place of management, place of incorporation or any other
criterion of a similar nature, but in the case of an estate or trust, only
to the extent that income derived by the estate or trust is liable to tax in
that State, either in its hands or in the hands of its beneficiaries. For
the purposes of this paragraph, a person who is not a resident of Canada
under this paragraph and who is a United States citizen or alien admitted to
the United States for permanent residence (a "green card" holder) is a
resident of the United States only if the individual has a substantial
presence, permanent home or habitual abode in the United states and that
individual's personal and economic relations are closer to the United states
than any other third State. The term "resident" of a Contracting State is
understood to include:
(a) the Government of that State or a political subdivision or local
authority thereof or any agency or instrumentality of any such government,
subdivision or authority, and
(b) (i) A trust, organization or other arrangement that is operated
exclusively to administer or provide pension, retirement or employee
benefits, and
(ii) A not-for-profit organization that was constituted in that State,
and that is, by reason of its nature as such, generally exempt from income
taxation in that State.
2. Where by reason of the provisions of paragraph 1 an individual is a
resident of both Contracting States, then his status shall be determined as
follows:
(a) he shall be deemed to be a resident of the Contracting State in which he
has a permanent home available to him. If he has a permanent home available
to him in both Contracting States, he shall be deemed to be a resident of
the Contracting State with which his personal and economic relations are
closer (centre of vital interests);
(b) if the Contracting State in which he has his centre of vital interests
cannot be determined, or if he has not a permanent home available to him in
either Contracting State, he shall be deemed to be a resident of the
Contracting State in which he has an habitual abode;
(c) if he has an habitual abode in both Contracting States or in neither of
them, he shall be deemed to be a resident of the Contracting State of which
he is a national;
(d) if he is a national of both Contracting States or of neither of them,
the competent authorities of the Contracting States shall settle the
question by mutual agreement.
-------------------
That gets a little complicated but essentially, it says that you can only be
taxed on your world income in either Canada or the United States. Article
IV(2)(a) states you will be taxable where you have a permanent home
available to you.
Buying a home which is really yours but registered in your daughter's name
and she lives in it would mean you had a home available to you in Canada.
Then we would have to look at where the rest of the family was living, where
they spent their time, and where they worked (centre of vital interests).
If you were truly living 220 days in the eh US, had a job in the US and your
spouse is with you and you have given up your provincial medical and
driver's licences and taken out state equivalents in the USA, your tax home
would clearly be in the US and the home in your name or your daughter's name
would not make you taxable in Canada. This is true because of
Article IV of the US / Canada Convention (Treaty). If you were in the
Bahamas or Saudi Arabia or Panama or another tax treaty less country, this
would not be true.
Answers to this and other similar questions can be obtained free on Air
every Sunday morning.
Every Sunday at 9:00 AM on 600AM in Vancouver, Fred Snyder of Dundee Wealth
Management and I, David Ingram will be hosting an INFOMERCIAL but LIVE talk
show called "ITS YOUR MONEY"
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I do not know how far the LD line reaches.
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