Canadian citizen buying US Las Vegas real estate (presale) - international non-resident cross border income tax help estate

> I would like to know of any precautions I should consider before 
> purchasing an American condo in Las Vegas as a presale.  I am a canadian 
> citizen.  Is there any additional taxes I have to endure?
> Thank you very much!
> --------------------------------------------------------------------------
> david ingram replies:
> I would worry about the condo completing and your being able to close the 
> deal.
> Construction costs in Las Vegas have risen 20% in the last year and there 
> is a real shortage or materials and labor.  as you will know, projects 
> have been stopped locally and trhere have been a couple of examples now of 
> developers returning the deposits and attempting to resell the units at 
> higher prices.
> As far as taxes go, the official position is that you wil pay tax to the 
> US federal governemtn and then report the income again in Canada.  Becasue 
> it sounds like you are intending to flip this, Canada will treat it as 
> straight income and then allow credit for the tax paid to the US on line 
> 431 of schedule 1 of your Canadian return.  If this does not use up all 
> the tax credit, you can claim the excess on the equivalent line of the 
> provincial form 428.
> Becaue buying a presale usually involves dealing only with the developer's 
> people, I advise you to take the contract to a local real estate lawyer 
> and have it checked over before signing.
> Watch out for contracts that require interim draws and / or personal 
> guarantees that could be called on in the event of a disaster.
> These other two questiosn will explain the Canadian side which is more 
> complicatred than the American side.
> ----------------------------------------
> My question is: Canadian-specific
> If we buy a fixer-upper to renovate and flip without renting it out what 
> are the allowable expenses for deductions?
> Thanks
> ____________________________________________________________________
> david ingram replies:
> In general anything you spend to do the fixing is a deduction from the 
> final sale profit.  This would include but is not limited to:
> materials, subcontractors, legal, accounting, real estate commissions, 
> surveyors, appraisals, interest on the mortgage, interest on a building 
> loan, interest on material loans (maybe because you used a credit card to 
> buy), truck expenses to get supplies and transport tools, afvertising, 
> utilities, photography, landscaping, trash removal, dumping fees, building 
> permits, architects fees, engineering fees, home inspection fees, 
> insurance, helpers, etc.
> Remember that any profit is taxable at straight income rates on line 135. 
> Flipping or renovating does NOT create capital gains tax.  The following 
> older Questions will explain that a bit.
> ______________________________________________________________________
> A "friend" who is a BC realtor and has the flipping  question presented to 
> her
> from time to time  recently attended a seminar that was related to this
> subject.  As a result she was able to provide me with some interesting
> thoughts to ponder concerning "intent" and "professional background" when 
> it comes to "flipping houses"
> and tax in Canada.  You may possibly be looked at as a Developer all the
> subsequent implications.
> Read the full article at < 
> <>>
> ----------------------------------------------------------------------------
> david ingram replies:
> In Canada, the purchase and sale of any piece of real estate with or 
> without
> renovations is considered a sale and subject to straight income tax 
> unless:
> 1. It was bought for and clearly used as your personal residence and was
> intended to be used for an indefinite period of time which is usually in 
> the
> five to ten year range.
> 2. It was bought as and used as a recreational property
> 3. It was bought for the purposes of earning long term rental income.
> In the case number 1, there is no tax.
> In the case of numbers 2 and 3, the sale is treated as a capital gain and
> only fifty per cent of the profit is taxed at your regular tax rates.
> Lots of / many (anyone caught) are taxed full tax rates when they buy a
> house, move in, fix it up and sell it a year or two later and then do
> another one.
> Of course, most are NOT caught in these circumstances.
> However, "any" flip is going to be straight income unless the person can
> prove that they bought it to live in and then:
> * married a person with three children and it is not big enough (had to 
> sell
> and bought bigger)
> * were transferred to another city (had to sell to buy in new city)
> * lost their job, were injured, etc. and can no longer afford to move in. 
> In
> this case, they would have to show that they had the finances to have paid
> for it when they bought it. (Not only can they not afford it but they have
> moved into their parents' basement (boomeranged).
> * Inherited a house from their parents and do not need it any more. (are
> living in the new house)
> You can read more by going to <> - click 
> on tax guide in the top
> left hand corner and then click on the "capital gain" section.
> david
> This older q & A also gives an idea
> My daughter is closing on a presale Yaletown condominium this summer.  She
> is working until Christmas in Alberta.  She returns to Vancouver from Jan 
> to
> May and if the job becomes a full time position, then she may return to
> Alberta to live.  At the time of presale, February 2004, we thought that 
> the
> suite would be assigned to her and that she would live in the suite.
> I was hoping that she could declare the suite as her permanent residence
> since she is only renting in Alberta and the work is not permanent.    In
> May 2007, she could decide to keep or sell the suite.
> What does she need to do in order to qualify the suite as her permanent
> residence?
>  -----------------------------------------
> david ingram replies:
> There is no absolute answer because you can call a toad a frog all day 
> long
> but it is still a toad.
> To be a principal residence and tax free for income tax purposes, the
> property must have been bought by her to live in and she HAS TO move into
> it. - No exceptions that I know of.
> You can expect that the CRA will be looking at "every" quick resale in 
> downtown building.
> In deciding if it is a capital gain or a flip, the CRA will be looking at
> the suitability of the unit as a residence, the ability to pay for the 
> unit
> and past and even future performance.
> In other words if she claimed this one as a principal residence and then 
> did
> it again a year later, the CRA would have every right to go back and
> reclassify the first one.
> david 
> ingram ---------------------------------------------------------------------------------------------------------------
> David Ingram's US / Canada Services
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> Disclaimer:  This question has been answered without detailed information 
> or consultation and is to be regarded only as general comment.   Nothing 
> in this message is or should be construed as advice in any particular 
> circumstances. No contract exists between the reader and the author and 
> any and all non-contractual duties are expressly denied. All readers 
> should obtain formal advice from a competent and appropriately qualified 
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> David Ingram gives expert income tax & immigration help to non-resident 
> Americans & Canadians from New York to California to Mexico  family, 
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> investments are all handled with competence & authority.
> Phone consultations are $400 for 15 minutes to 50 minutes (professional 
> hour). Please note that GST is added if product remains in Canada or a 
> phone consultation is in Canada.
> This is not intended to be definitive but in general I am quoting $800 to 
> $2,800 for a dual country tax return.
> $800 would be one T4 slip one W2 slip one or two interest slips and you 
> lived in one country only - no self employment or rentals or capital 
> gains - you did not move into or out of the country in this year.
> $1,000 would be the same with one rental
> $1,200 would be the same with one business no rental
> $1,200 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.
> $1,500 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
> $1,600 would be for two people with income from two countries
> $2,800 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 $150.00 up.
> With a Rental for $350
> A Business for $350 - Rental and business likely $450
> 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 $800 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.
> Just a guideline not etched in stone.
> This from "ask an income trusts tax and immigration expert" from 
> <> or 
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