non-resident taxes on US real estate -

[email protected] wrote: 

*******************************************************************************
From:           XXXX
My_question_is: US-specific
Subject:        non-resident taxes on US real estate
Expert:         [email protected]
Date:           Thursday May 22, 2008
Time:           03:16 AM -0000

QUESTION:

I am a Canadian citizen considering purchasing a mobile home in Arizona with the idea of becoming a "snowbird" (3 months of the year).  Are there any non-resident taxes payable on the purchase?  What about when I sell the mobile?

Thanks so much.
---------------------------
To busy to answer anew but this older question answers most of it I think

I am a US citizen living and working as a real estate agent in Maui, HI.  MANY Canadians own or are looking into owning condos here in South Maui and renting them out (when they are not here) to tourists to use for their vacation.  Can you help me clarify what the legal and tax issues are for these Canadian buyers?  Are they allowed to rent out their condos?  Can they rent it themselves?  Or MUST they use a US rental agent?  Can they come and do repairs on THEIR property?  It would seem from your answer in "http://www.askanexpert.ca/answer.asp?id=7528" >http://www.askanexpert.ca/answer.asp?id=7528</a> that they are not even allowed to come and change a light bulb!  And if that is the case, just who is "not allowing" them to do this? - the US or CANADA?  Thanks for your help on this.  I want to make sure that all of the Canadian buyers are getting the correct information.


---------------------------------------------------------------------------
david ingram replies:

I use to have a condo manager friend Howard ?? in Maui.  He was a friend in Vancouver in 1965 when he managed CKLG-FM radio station.  He then left and moved to Maui and got into the condo business.  I am embarrassed that I do not remember his last name but i have not seen him since 1979 when I rented a condo from him in Kihei.  

Back to your question. 

You have become a very powerful person. With your knowledge, you now
hold the ability to have a lot of Canadians arrested and deported. You
could even report them for something that they did two years ago.

1. Canadians or Japanese or Koreans or Australians can buy a condo or
$5,000,000 waterfront estate in Hawaii, New York or Palm Springs and
rent it out.

2. They can even show the property themselves. They can NOT
however, collect the rent themselves. They can hand the person an
envelope and instruct them to mail the cheques to Canada or Australia or
Japan or give them written instructions to direct deposit the money
into a Hawaii Bank Account. They just can NOT accept the money at the
same time they show the property.

If they want to accept the money themselves, they can fly back to
Canada and turn around and pick up the money and return to Canada
immediately. The Canadian, or, or, or just can't do anything else while
picking up the money.If the renter said they needed a new
refrigerator while the Canadian was picking up the check (or maybe a
year's supply), the Canadian could not go over to a Home Depot and 
order a new fridge on the same trip.

On a trip that they do not pick up money, the Canadian can hire a
property manager, hire a repair crew, hire someone to change the light
bulb, shovel a sidewalk, cut the lawn, etc.

3. On any trip, the Canadian himself or herself can NOT change a
light bulb,cut the lawn, fix a toilet, paint a bedroom, shovel a
sidewalk or fix the door bell on a unit that they are renting or
intending to rent in the future or that they have bought to improve and
sell.

4.  It is US immigration law that prevents the Canadian from working
on his or her rental property.

However, the Canadian can supervise the renovations or repairs as long
as he or she hires US residents to do the work.

If the Canadian wanted to start a business of renovating and flipping,
he or she could get an E2 visa which would allow them to be there and
work on their own or even others houses.

If they wanted to spend $1,000,000 and hire ten employees for two
years, they could an instant green card by applying for and getting an
E-5 visa.

5. Every Canadian owner also needs to collect Hawaii 4% GET (General
Excise Tax) if they rent it on a long term and 6% TAT (Transient
Accommodation Tax) if rented for short term rentals of 180 days or less
to a person who has another home somewhere else, even if it is in
Hawaii. As you can see, every rental to a Canadian requires the TAT
and GET. The Canadian should collect 11.1111 % tax because taxes are
levied on each other which should cover both.

If they do not collect it and Hawaii gets hold of them, the retroactive
tax can be massive. I had one that was over $87,000 for back GET and
TAT against a Canadian who collected all of her rents in Canada. Even
though she had a legitimate rental loss on a very expensive property
when Hawaii caught up to her, they issued her a retroactive bill plus
large penalties and interest.

So, 'If' the Canadian wants to collect rent "in" Canada from Canadians
for seasonal rentals, that is fine. However, they also have to collect
the TAT and GET taxes in Canada on their transient rentals or end up in
trouble later on.
-----------------

When Can the Canadian do the work.

If the Canadian or, or, or wanted to buy a piece of vacant land, they
could build a whole house themselves including foundation, framing,
drywall, roofing electric, plumbing, heat pump and landscaping IF it
was just for their own use.

If they own a condo, they can do any remodeling to their own condo or
their own mobile home or their own 

However, their Canadian adult children, Canadian Friends or Canadian
trades can NOT come down and work on the weekend. They can NOT let a
Canadian friend who just happens to be a remodeler, go down and stay
in the unit while they change the kitchen.

I first had this explained to me on a 72 Foot converted minesweeper
named Montagnais in Ketchikan, Alaska in May 1975. I was changing over
a hot water tank on this boat (which i was a guest on from Vancouver to
Ketchikan) and when the US customs and immigration people came on board to
clear the boat and personnel through customs, I was chastised by them
for working on the boat. Today, it would be arrest and imprisonment. 

Several months later, the same thing happened at Mount Baker when the
INS threw a bunch of guys I knew out of the US for working on a
friend's ski cabin.

Thirty-three years later I have heard the story 1,000 times and they
get progressively worse.

The Canadian, of course has to file both a Federal 1040NR return with a
schedule E and 4562 to report the rental income federally.  In
addition, they have to File a Hawaii N-15 Non-resident return and the
Hawaii GET and TAT return
---------------------
If and when you sell your mobile a at a profit, you will owe tax to Arizona, The US federal Government and maybe to Canada if the tax is more than you have already paid to the US.  The tax you paid to the US can be used as a foreign tax credit on forms T2209 and T2036 in Canada.

There are no specific non-resident taxes to pay on the purchase.

-----------------------------------



SUGGESTED PRICE GUIDELINES - May 17, 2008

david ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
4466 Prospect Road
North Vancouver,  BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325

Calls welcomed from 10 AM to 9 PM 7 days a week  Vancouver (LA) time -  (please do not fax or phone outside of those hours as this is a home office) expert  US Canada Canadian American  Mexican Income Tax  service help.
pert  US Canada Canadian American  Mexican Income Tax  service and help.
David Ingram gives expert income tax service & immigration help to non-resident Americans & Canadians from New York to California to Mexico  family, estate, income trust trusts Cross border, dual citizen - out of country investments are all handled with competence & authority.
 
Phone consultations are $450 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or is to be returned to Canada or a phone consultation is in Canada. ($472.50 with GST for in person or if you are on the telephone in Canada) expert  US Canada Canadian American  Mexican Income Tax  service and help.
This is not intended to be definitive but in general I am quoting $900 to $3,000 for a dual country tax return.

$900 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only (but were filing both countries) - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
 
$1,200 would be the same with one rental
 
$1,300 would be the same with one business no rental
 
$1,300 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes.
 
$1,600 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits  no move in or out

$1,700 would be for two people with income from two countries

$3,000 would be all of the above and you moved in and out of the country.
 
This is just a guideline for US / Canadian returns
 
We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $200.00 up. However, if you have a stack of 1099, or T3 or T4A or T5 or K1 reporting forms, expect to pay an average of $10.00 each with up to $50.00 for a K1 or T5013 or T5008 or T101 --- Income trusts with amounts in box 42 are an even larger problem and will be more expensive. - i.e. 20 information slips will be at least $350.00
 
With a Rental for $400, two or three rentals for $550 to $700 (i.e. $150 per rental) First year Rental - plus $250.
 
A Business for $400 - Rental and business likely $550 to $700
 
And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return.
 
Moving in or out of the country or part year earnings in the US will ALWAYS be $900 and up.
 
TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return.
 
8891 forms are generally $50.00 to $100.00 each.
 
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
 
Capital gains *sales)  are likely $50.00 for the first and $20.00 each after that.

Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be from $150 to $600.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc. Note that these returns tend to be informational rather than taxable.  In fact, if there are children involved, we usually get refunds of $1,000 per child per year for 3 years.  We have done several catch-ups where the client has received as much as $6,000 back for an $1,800 bill and one recently with 6 children is resulting in over $12,000 refund. 

Email and Faxed information is convenient for the sender but very time consuming and hard to keep track of when they come in multiple files.  As of May 1, 2008, we will charge or be charging a surcharge for information that comes in more than two files.  It can take us a valuable hour or more  to try and put together the file when someone sends 10 emails or 15 attachments, etc. We had one return with over 50 faxes and emails for instance. 

This is a guideline not etched in stone.  If you do your own TDF-90 forms, it is to your advantage. However, if we put them in the first year, the computer carries them forward beautifully.
 








Comments (0)

CEN-TA Cross Border Services - Tax, Visas, Immigration
http://www.centa.com/article.php/UsCaWeekofMon20080519004018.html