QUESTION:
My husband & I would like to take advantage of the current exchange rate as well as the deflating housing market in Arizona. We are concerned about being taxed on our 'world income' which is a Canadian gov't pension and RRSPs as well as other Canadian real estate holdings i.e. two Canadian investment properties and one cottage. We are concerned about what happens to our estate when one or both of us dies. You probably have answered this question a million times before but I couldn't pull up information from you site. It may be because I just registered today. Looking forward to your response. -----------------------------------------------------------
david ingram replies:
assuming you are buying a vacation p[roperty and not an investment property, Canada will treat it the same as if it was at the Lake of the Woods in Ontario, Lake Okanagan in BC or Lake LaBarge in the Yukon.
When sold, Canada, Arizona and The US federal government will all want capital gains tax if it hasd gone up in value. Canada will give you credit for the tax paid to the US and Arizona.
If one of you dies with a total world wide estate of more than $2,000,000 in 2007 or 2008 or $3,500,000 in 2009 (the amounts have not been set for 2010 and beyond) the unit would be subject to US estate tax on a pro-rata basis. However, Caanada would allow a foreign tax credit against any capital gains tax incurred by the deemed sale on death.
If you are in the US for less than 120 days a year, there is no US tax filing liability. If you are there for 140 days a year for two years in a row or more than 120 days a year for three years in a row, you trigger the necessity to file a US 1040NR tax return each under the substantial presence test.
Go to www.centa.com and read the April, 1994 newsletter in the top left hand box for an explanation of how and why.
If you are intending to rent the unit the rules are different and this older Q & A will likley help you. �
