deemed non-resident or resident with Canadian rental apartment - Expert Income Tax help on cross Border tax and immigration and

Below is the result of your feedback form.  It was submitted by
XXXXXXX on Sunday, April 25, 2010 at 16:30:28

My_question_is: Both

I am confused on how the CRA determines residency.  My husband re-located to the USA 10 years ago.  
I have an apartment that I still own in only my name.  I did not move permanently to the states with my husband.  
I stayed in Canada to help my mother who is ill.  I was living in Canada with my mother and rented my apartment out.  
I went back and forth between my family in the USA and my mother in Canada over the last 10 years.  
I was in Canada more than the USA.  I did not work.  
In 2007 I had my accountant file my taxes in Canada for the years 1999-2000 even though I had no income.  
I get a letter from the CRA in Jan 2010 that I owe 4,000.  I contacted my accountant right away, he did not know anything about this. 
I told him when I call the CRA they told me they contacted my accountant's offic in 2007 and advised another accountant in the office
that I had no taxes due from the returns sent in for those years but that due to the accountant filing the 216 return l ate for the years 1999-2005. 
I owed non-resident tax arrears and that although they reversed any taxes due,as my apartment ran at a loss every year. I owed interest on the 
money that I could have owed??
No one contacted me, the CRA also said they had returned mail from me...weird because I have gotten every other letter to date, including all my 
returns from those years filed with a 'nil' amount due.
My accountant suggested I write the CRA and ask to forgive this amount as there was never any taxes due in the first place.  
I am not sure what the outcome will be.  I argued my residency point with the CRA a few years ago and they wrote me a letter stating they are 
now considering me a resident from 1999 - 2005? I had lived in my apartment in 2005.
I am living in my apartment now and due to all my renters, am having to basically gut it and plan to sell it.  Where do I fit in with capital gains.  
I believe I am and have always been a resident of Canada.  I am told I will have to pay the 50% of the difference from when I bought in 1999  to 
when I sell in 2010 and then 25% cap gains this right!

Sorry for blabbing on and on, with my husband's business closing in the US and having to start over again at our age is frustrating to have 
to give our hard working nest egg to the government. Anyway, I hope I get picked by your experts to know where I stand with the CRA.

Thanks for reading!! ---------------------------------------------------------------------------

david ingram replies:

As described, any capital gain on the apartment is taxable if it was rented out all this time whether you were a resident of  Canada or the US or both.

I will bet you $100 right now that you also filed a US 1040 Joint return with your husband showing you as a resident of the US all of this time. A big question I have is whether or not you reported the Canadian rented apartment on that 1040.  I bet not from your email which is a 'very; serious US matter.  An interesting part here is that if the apartment lost money, it would have meant less US tax payable.

Normally, you would have a very difficult time proving you are a resident of Canada as well and reversing the Section 216(4) tax returns filed. It can be done however if you had a Canadian Driver's licence (no US driver's licence) and a provincial medical card and can show from phone bills, hospital visits, etc., that you were closer connected to Canada then the US, it can be done for the rest of the years.
And, the good news is that it will not affect your US income tax filed with your husband BUT, in a strong pitch, could affect your US residency status if you have a green card which requires you to be in the US more than 183 days a year.

The problem with Section 216(4) returns is that losses can NOT be used against capital gains.  A good accountant just about never files a section 216(4) return with a rental loss.  The accountant should capitalize interest, taxes and repairs rather than use them as a deduction to create a loss which is lost against capital gains.
Worse news is that you created a deemed sale on the apartment when you moved back in and that has to be dealt with immediately if you moved back in 2009.  If you did, you have a 2009 tax bill even though it was not sold.

You do not pay 50% of the difference.  What you have to do is pay tax on 50% of the profit from when you moved out of it and rented it.

Depending upon the profit, that tax can be as low as 11% of the profit if the profit is less than $70,000.  The absolute most tax you would pay is about 24% of the profit if you made over $300,000.

Hope this helps somewhat.  You need to talk to someone who understands the rules and you need to understand them yourself.  You are responding to outside events rather than doing what is proper under the act. 


If your question was not answered fully or you wish to go further, I am available for individual consultations by phone or email or in person for $450 per professional hour. 

Please also note that we prepare Canadian, US, Australian, UK and New Zealand returns on a mail in, email, fax, snail mail or couriered basis. At any time, our clients are in 40 countries or more.  They have every occupation from nuclear Submarine captains to FedEx pilots to Major Bank officers to Politicians, Diplomats and border patrol officers.  My favourite, however, is a penguin catcher in Antarctica among others there..

If you 'really' only have a single question requiring a 'couple' of minutes, you can try phoning me for free as part of the following.

- For a quick free question

You might try calling Fred Snyder's radio program for an answer on a Sunday Morning.. 

Fred Snyder's  "IT'S YOUR MONEY" radio show. on CISL,  650 AM on the dial in Vancouver from 9 to 11:00 AM every Sunday  (604) 280-0650 or (877) 280-0650 - You can listen live from anywhere in the world at from anywhere in the world. click on the button in the top left hand corner.
You might try calling Fred Snyder's weekly radio programs for an answer. 
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Authored by: Lilly Adams on Tuesday, August 03 2010 @ 06:58 AM PDT deemed non-resident or resident with Canadian rental apartment - Expert Income Tax help on cross Border tax and immigration and
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