buying house in the us - David Ingram expert income tax and immigration help and preparation of US Mexico non-resident and cross

QUESTION:IS IT BETTER TO BUY A HOUSE IN THE U.S. IN YOUR PERSONAL NAME OR A COMPANY NAME.

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

I think you are 99 out of a 100 better off to buy in your own name. Ifit is a rental - do NOT work on it yourself.



QUESTION:

What is the best way to either structure a company (Canadian or USA)orset myself up personnel to shelter / minimize taxes paid as a Canadianresident, working in BC, investing in real estate in SanDiego,California, USA?


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david ingram replies:

There is no one best way because everyone is different in terms ofestate, family, immigration and other issues.

In general I do NOT recommend buying in the name of a company. If thedesire is to escape public liability, you do that with a good insurancepolicy.
Directors can be held liable for many, if not 'most'responsibilities of a limited company if the creditor or wronged personwants to pursue it. Think of the driver of a car belonging to a limitedcompany. They sue the company AND the driver.
If you incorporate cross border, be prepared for anextra $2,000 a year in accounting plus legal fees plus extra statefiling fees. California where you are thinking of investing, has aminimum $800 a year government filing fee for an LLC as an example evenif you lost or lose money on the rental..

The following older Q & A may help.

QUESTION:

We just purchased property in Spokane Washington( a 4 plex apartments)
We plan on renting out 3 of the units and keeping one. I was told bythe border crossing inspector,
that I have to hire a rental agency in order to rent out the apartments.
and I also have to have a property manger full time..
We will be at our apartment approx 2 times a month..
So we do not need a property manager.
Do you know if this true,, or please direct me to the correct personthat would be able to help me.
Thanks for your time.
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david ingram replies:

You need a property manager if you do not want the strong possibilityof going to jail for a few days before being deported and then notallowed back in the USA. For a story about US Immigrations hell for aHoliday Inn Manager, try
http://apostille.us/news/local_holiday_inn_express_manager_in_jail_on_immigration_charges;_husband_fights_for_her_return.shtml
or how about a married woman's ordeal in Georgiafor a traffic violation at
http://www.canada.com/ottawacitizen/news/story.html?idf4f1d2fb-07ae-4560-8f6c-703acf8146fb&k0

Crossing the border when you have an ad running to show the premisesand saying you are going down to spend the weekend in your holiday home(i.e lying to the HOMELAND Security official) could result in seizureof your vehicle and a ban for up to 10 years under their ER (ExpeditedRemoval) process. In other words, it is more serious to lie to theguard at the border than it is to do the work.

You 'could' actually show the property for rent, but you can NOT writeout a contract for rent or collect a single rent cheque (check) or cashfor rent in the United States. There is nothing new about this. Thefirst time I ran into it was in 1972 or 1973.

If you are physically there, you can NOT cut the grass, shovel thesidewalk, paint or decorate or repair or fix or remodel or improve ortake out the garbage for any part of the rental property.

You can paint and clean your own unit if it is NEVER rented or intendedto be rented. You can not paint and clean up getting the property readyfor rent so DO NOT make the mistake of thinking you can live in one,clean it up and remodel it and then rent it out and do the same foranother one and then another one and another one. If you do this andone of your tenants (who maybe doesn't like you because you evictedthem or told them to turn their stereo down when you happen to be intown or for any other reason) read my website, (or the uscis website)he or she would find out that you can NOT do this stuff and could phonethe Homeland Security office or write an anonymous letter and you couldbe arrested in November 2008 for something you did in December 2007.

This may seem unreal, but in US terms, working without a visa is justas serious in law as the spontaneous robbing of a convenience store andthe penalties can be worse. Think of those nightly news shows with 28illegal Mexican or Guatemalan citizens being stuffed into Paddy wagonson the Arizona border. This is not a racist comment but with theMexican illegal immigrants, bing rounded up and shipped back across theborder is a way of life with no social stigma. For a nice clean livingCanadian, being thrown into an immigration detention cell for takingmoney for rent is a devastating experience. In one case, a mother andher son were thrown into jail for 5 days in Phoenix when she went toPhoenix from White Rock BC. Her husband owned 18 units and HAD aproperty manager. Unfortunately, he also died in the arms of thatfemale property manager and his widow then fired the property managerand she and her 20 year old son went to Phoenix to collect the rent andhire another property manager.

The property manager (who knew the law as everyone in Arizona does)phoned Homeland Security who showed up and arrested mother and son andthrew them into the notorious Phoenix Immigration hell with some 300other illegals. To rub salt into the widow's wounds, the propertymanager ended up with the property because she was a second mortgageholder on the property and the property fell into default because ofthe widow's cash flow troubles, largely because she could not go toPhoenix to hire another property manager.

For instance, for 'you', this kind of arrest could result inimprisonment for a usual five days in a US immigration jail until youposted $5,000 bail each and then being banished from the US for five toten years.

It does not stop there. This type of conviction would stopyou getting on an airplane which stopped in the USA on the way toMexico. AND, under new US laws that have been proposedbut not yet actually put in place, the arrest and banning would stopyour Nov 6 trip to Cancun because people in this position will not evenbe allowed on commercial airliners that are flying over any part of theUS. To get to Cancun, you would have to fly from Calgary or Vancouverto London England and then back to Mexico City and 'then' to Cancun andreverse it to get home.

This may be overkill but 'You' are / were lucky that the inspector gaveyou the correct advice BEFORE you put your foot in it.

By the way, for income tax You ALSO HAVE TO FILE A 1040NR US TAX RETURNWITH A SCHEDULE E AND A SCHEDULE 4562 EACH. Then the same income getsput on Schedule T776 of your Canadian return. If you have paid tax tothe US, you will claim it as a credit on Canadian forms T2209 and T2036.


These older questions will help you AS WELL.

QUESTION: Hello David,I'm living in Vancouver, finally paid off the student debt but don't see myself getting into 
the expensive Vancouver market. I do however like to ski and was thinking of buying an 
inexpensive trailer (25k Cdn) in Maple Falls Washington. 
 
However I'm not sure what other expenses I should expect given that it's in the US. 
I'm not trying to make this an investment with a high return, but I would like to do some 
handy work to it to increase the value. If I add about 10k worth of value, how would that 
affect my taxes in the long term?Thanks for the advice.
----------------------------------------------david ingram replies:One of my favourite weekends ever was in 1973 at the Chandelier (think it has a different name now) when marooned at SnowLine  because of the gas shortage when one could only buy gas on odd days if your licence plate ended with an odd number and even days when it was an even number.Strangely, it was that weekend 34 years ago that lets me answer you question now.The cabin I was staying in was not a rental but was built by the fellow who owned it.  When he was building it, buddies would come down and help him and one weekend, the INS raided the spot and deported a bunch of his friends for working in the US .He was fine building it because he owned it but no one else can hammer a nail, paint a board, install a sink, or carry a shingle if they are not either an owner or a legal US citizen or US resident with a green card.If your buddy is working and living in the US with a TN, H1, O1, P1, L1 or any other visa but a green card, they cam NOT help you either.And, if you are intending to rent the trailer out 'EVER', 'you' can NOT hammer a nail, sweep the front steps or clean the toilet.Assuming you are buying this trailer on its own lot, when you go to sell, you will owe the US income tax on the profit.If it is your only piece of real estate at that time, you will not owe Canada any tax because you can claim it as your personal residence if you have not bought another place.-------------------However, I would far prefer that you stretched your resources to buy something in Canada to live in and combine your present rent and the payments you would have to make for the trailer to buy your home in Canada. If you can't afford a one bedroom, buy a studio.  Go down to Ike on the Lougheed highway and look at how much they can put into a small space. Interestingly, I read the other day that IKEA has now sold enough furniture in North America that 10% of all children are conceived in an IKEA Bed.  Now that is information worth knowing.Good luck

=2E

QUESTION:

If a Canadian citizen purchases real property in the U.S. are theyrequired to have a U.S. Social Security Number? Am I correct that mytax liability will be to the U.S., whilst reporting my income to theCRA but with offsetting foreign tax credits due to paying U.S. incometax? For liability purposes, would it be more beneficial tax-wise tohold the U.S. properties under a Canadian or U.S. corporation? Thankyou.

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

david ingram replies:

Assuming that you are going to rent the property out, you will need anITIN (Individual Taxpayer Identification Number). Fill in a W-7 andsubmit it with your first tax return or try and get it at the bankwhere you get your mortgage.

I do not suggest a corporation in either country unless you want tospend a couple of thousand dollars a year extra on accounting. As aforeigner with a US corporation, you will need to fill in form 5472with your 1120 corporation tax return. Then, because the mind andcontrol of the corporation is in the hands of a Canadian resident, youwill need to file again in Canada.

This older Q & A may help

My wife and I are Canadian citizens and own a rental property (house) in Arizona. 
Do I need to file income tax in the USA? Can we deduct the mortgage interest 
and any expenses associated with the rental on our Canadian income tax return?Thanks and regards,______________________________________________david ingram repliesIf you do not file a US 1040NR with Schedule E and Arizona 140PY or 140NR return, you face the likely Federal penalties of a $1,000 to $10,000 fine each per year for failure to report rental income as a non-resident plus 30% of the gross rent with no expenses allowed. That is for each of you if you both own the property.  And, I  have never seen a $10,000 penalty.Then, you will EACH be assessed 30% of the gross rent with no expenses allowed.(Canada's penalty of  just 25% of the gross rent with no expenses in reverse seems mild in comparison.)FILE the US returns for every year you have missed.THEN - There is NO responsibility for you to claim any rental expenses on your Canadian return.  You can claim them if you wish on form T776.  HOWEVER, you MUST report the gross rent on line 126 of your T1 if you do not claim expenses and the net rent if you do,.If there is a legitimate rental loss which has not been created by your using the unit personally, you can use the loss to reduce your other taxable income.A Warning.  There is ample evidence that the IRS and CRA are pro-actively sharing information about these.  And, if you are in a complex and using the unit personally NEVER talk about the fact you have not filed a US tax return and don't ask a local.  I personally know of two people who make their living turning in Canadians who are not filing their US returns.  There is a 10% to 30% reward for turning you in by filing US form 211. See it at www.irs.gov - click on forms, etc.If you need help with this, you now know where we are.------QUESTION:We have a rental property in the US.  Can I claim the property taxes paid on my condominium as a rental expense deduction on my Canadian taxes?  Form T776 mentions only Canadian property taxes however, the general guide states that all expenses can be deducted.--------------------------------david ingram replies:Anythingthat can be claimed on schedule E of the US return can be claimed on formT776You need to do your Schedule E 1040NR first and then convert the USfigures to the T776 on  your Canadian return.  If the condo is inArizona, you would do a 140NR or if in California, a 540NR.There is nostate tax in Florida, Texas or Nevada, the other three popular places for aCanadian to have a rental US condo.The difference between the twocounties is the method of claiming depreciation.  In the US, you MUSTcalculate the depreciation and include it even if it creates a loss.  Thegood news is that the operating loss caries forward as a future deductionagainst rent OR Capital Gains as opposed to non-resident losses in Canada whichunfairly disappear into the ether.In Canada, you do NOT have to claim itand if you do, can only claim enough to create a zero rental. Depreciation orCCA (capital cost allowance) as we call it can NOT be used to create or increasea loss.Make sure that you do the US returns, particularly if you arelosing money.  The penalty can be a minimum of $1,000 to $10,000 PLUS 30%of the gross rent for failure to file a US rental return by anon-resident.We, of course, are ideally suited to look after these foryou by fax, snail mail, email or courier.---------_____________________________________________

QUESTION:

Hi,

My wife and I are looking at possibly purchasing a condo in PalmSprings for our retirement. We are both 50 years old and plan onworking for the next 7 or 8 years. Our plan is to purchase and use it afew times a year and rent/lease it out for the remainder of the yearuntil we reach retirement at which time we would spend 4 or 5 months ayears there. Looking for some advice on what we should be looking outfor and what would be a better choice mortgage wise, U.S. or Canadianfunding. Or is it a good idea at all to purchase U.S. real estate as aCanadian? Any advice or literature that's out there that you coulddirect us to would be greatly appreciated. Thanks!

xxxxx xxxxxxxx
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david ingram replies:

If your intention is to start spending significant time there, buyingnow is extremely sensible because you are buying it at today's pricewhich will logically go up in the future. You 'are' of course, alsodealing with exchange.

Since your earnings are in Canadian dollars, borrowing the money inCanada and paying cash in palm Springs means that you will be paying ina known currency.

To explain that statement, persons who bought in 1991 with a USmortgage payment of $1,000 needed $1,145.87 Canadian dollars to makethe payment. By 2001, they needed $1,548.62 to stay even.

However, in reverse, if you bought in 2002, you needed 1,570.36 andonly need about $1,060 to stay even today.

Currency exchange does go both ways.

You might want to borrow half in Canada and take out a mortgage forhalf in Palm Springs.

If you are renting the property, you will both need to file a USFederal 1040NR with Schedule E and California 540NR return and thenchange the currency to Canadian and file form T776 with your CanadianT1 returns. Failure to file the form 1040NR can have penalties of$1,000 to $10,000 per year per return per person even if you losemoney. A very real problem is that all sorts of Canadians approach aUS accountant and ask about filing and are told they do not need tofile a return because they are losing money. Not so. When it comestime to file, hunt down a specialist in dual country tax returns likeGary Gauvin in Dallas,, Steve Peters in Halifax, Kevyn Nightingale inToronto, Brad Howland in Victoria or myself in Good Old North Vancouver.

Whatever you do, do NOT buy it in a corporate name. You will not saveanything and end up with another $2 or $3,000 of accounting fees.

You will also need to file personal US tax returns if you are theremore than an average of 120 days a year. See the April 1994 newsletterin the top left hand box at www.centa.com
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It is very unlikely that blind or unexpectedemail to me will be answered. I receive anywhere from 100 to 700 unsolicited emails a day and usually answer anywhere from 2 to 20 ifthey are not from existing clients. Existing clients are advised toput their 'name and PAYING CUSTOMER' in the subject and get answeredfirst. I also refuse to be a slave to email and do not look at itevery day and have never ever looked at it when I am out of town. expert US Canada Canadian American Mexican Income Tax help
However, Iregularly search for the words"PAYINGCUSTOMER" and always answer them first if they did not get spammed out.As an example, as I write this on Oct 18, 2007 since June 16th (124days), my 'spammed out' box has 34,939 unread messages, my deleted boxhas 11854 I have actually looked at and deleted and I answered 1078email questions for clients and strangers. I have also put aside 622messages that I am maybe going to try and answer because they lookinteresting. -expert US Canada Canadian American Mexican IncomeTax help

Therefore, if an email is not answered in 24 to 36 hours, it is lost in space. You can try andresend it but if important AND YOU TRULY WANT OR NEED AN ANSWER, youwill have to phone to make an appointment. Gillian Bryan generallyaccepts appointment requests for me between 10:30 AM and 4:00 PM Mondayto Friday VANCOUVER (Seattle, Portland, Los Angeles) time at (604)980-0321. expert US Canada Canadian American MexicanIncome Tax help.

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Disclaimer: This question has been answered without detailed information orconsultation and is to be regarded only as general comment. Nothingin this message is or should be construed as advice in any particularcircumstances. No contract exists between the reader and the author andany and all non-contractual duties are expressly denied. All readersshould obtain formal advice from a competent andappropriately qualified legal practitioner or tax specialist for experthelp, assistance, preparation, or consultation in connection withpersonal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must beincluded." expert US Canada Canadian American MexicanIncome Tax help.
DavidIngramgives expert income tax & immigration help to non-residentAmericans & Canadians from New York to California to Mexico family, estate, income trust trusts Cross border, dual citizen - out ofcountry investments are all handled with competence & authority.
Phoneconsultations are $400 for 15 minutes to 50 minutes (professionalhour). Please note that GST is added if product remains in Canada or isto be returned to Canada or a phone consultation is in Canada. expert US Canada CanadianAmerican Mexican Income Tax help.
This is not intended tobedefinitive but in general I am quoting $900 to $2,900 for a dualcountry tax return.
$900 would be one T4slip one W2slip one or two interest slips and you lived in one country only (butwere filing both countries) - no self employment or rentals or capitalgains - you did not move into or out of the country in this year.
$1,100 would be the samewith onerental
$1,300 would be the samewith onebusiness no rental
$1,300 would be theminimum witha move in or out of the country. These are complicated because of theback and forth foreign tax credits. - The IRS says a foreign tax credittakes 1 hour and 53 minutes.
$1,600 would be theminimum witha rental or two in the country you do not live in or a rental and abusiness and foreign tax credits no move in or out

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

$2,900 would be all ofthe aboveand you moved in and out of the country.
This is just a guidelinefor US /Canadian returns
We will still prepareCanadian only (lives in Canada, no US connection period) with two orthree slips and no capital gains, etc. for $175.00 up.
With a Rental for $375
A Business for $375 -Rental andbusiness likely $500
And an American only(lives inthe US with no Canadian income or filing period) with about the samethings in the same range with a little bit more if there is a statereturn.
Moving in or out of thecountryor part year earnings in the US will ALWAYS be $800 and up.
TDF 90-22.1 forms are$50 for thefirst and $25.00 each after that when part of a tax return.
8891 forms are generally$50.00to $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 theCanadian return as a guide will be $150 to $500.00 depending uponnumbers of bank accounts, RRSP's, existence of rental houses, etc.

Just a guideline not etched in stone.
This from "ask an income trusts taxandimmigration expert" from www.centa.com or www.jurock.com or www.featureweb.com. David Ingram deals on a daily basis with expatriatetax returns with multi jurisdictional cross and trans border expatriateproblems for the United States, Canada, Mexico, Great Britain, UnitedKingdom, Kuwait, Dubai, Saudi Arabia, Thailand, Indonesia, 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, StVincent, Grenada,, Virgin Islands, US, UK, GB, and any of the 43 stateswith state tax returns, etc. Rockwall, Dallas, San Antonio Houston,Denmark, Finland, Sweden Norway Bulgaria Croatia Income Tax andImmigration Tips, Income Tax Immigration Wizard AntarcticaRwanda Guru Consultant Specialist Section 216(4) 216(1) NR6 NR-6 NR 6Non-Resident Real Estate tax specialist expert preparer expatriate antimoney laundering money seasoning FINTRAC E677 E667 105 106TDF-90 Reporting $10,000 cross border transactions Grand Cayman ArubaZimbabwe South Africa Namibia help USA US Income Tax Convention. expert US Canada CanadianAmerican Mexican Income Tax help.

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