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As for Mr Ingrams tax questions;
1) As a nonresident Canadian who is building an investment property portfolio (I own 2 positive CF'ing Duplexes in MB, mortgage note in AB, land in AB) what is the best structure to set up to minimize taxes?
2) I formed an LLC in '02. I haven't filed taxes yet. My accountant has been preparing them for Sept.30th. Do you suggest a Dec.31st year end? And if so, can I change my year end next year?
3) During the Dec. REAG seminar you suggested to 'kill your corporation'. I understand that my corporation doesn't offer me much legal protection, from liability. But as a nonresident, do you still recommend killing it? If so, what is a better way to protect me (or reduce taxes) from taxes as a nonresident and aid me in building my investment properties? My goal is monthly passive income. I don't plan on returning to Canada for another three years.
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david ingram replies:
1. Minimizing taxes is only one part. Ease of holding, ease of sale and non-resident matters make the ownership of a Canadian LLC, particularly a new one more likely to trigger interest from the CRA (new name for CCRA which used to be Revenue Canada Taxation)
I would never recommend that you put your properties into a Corporation. A Non-resident corporation will pay a higher tax rate on the first $30,000 of profit than an individual does in Manitoba, Saskatchewan Alberta or British Columbia.
2. Anything but a Dec 31st year end only makes money for accountants. The tax year is Dec 31st. Banks and all financial institutions report the figures on Dec 31st. Even if you can justify a small savings in tax the first year, you will pay it back in accounting fees.
3. The method is not as important as the "doing". The corporation will be in your way for ever, requiring accountants and lawyers advice and services that are just not necessary if you have good PL (public liability) and PD (property damage) insurance policies.
This is really basic. I thought I had answered your original Oct 31st question. However, I cannot find it so it must have ended up in a draft that got killed and never sent. I remember that I needed your address,
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 & the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent financial, or real estate planner or advisor & appropriately qualified legal practitioner, tax or immigration specialist in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
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