American wants to buy Canadian Rental Property in

My question is: Applicable to both US and Canada
QUESTION: I am an american citizen looking to invest in a rental property in Canada and am wondering if there are any laws that would make this difficult or not cost effective for me.  Would my profits be taxed by both countries?  Would it be better for me to borrow money in Canada or the U.S.?
david ingram replies:
I am just too busy to answer thyis question "fresh".  However, the following should help and I would be pleased to help you in the future
As a US citizen, if I put out to rent an apartment that I own in Montreal do I have any obligation to file an NR6 or to withold taxes from the rent? Do I have any obligation to advise my tenant to withold taxes? If I do neither, will I incur any penalty when I file my annual tax return in Canada reflecting my small gain/loss on the proerty?
david ingram replies:
It is your responsibility to arrange for an agent although I did a return for a fellow from LA this week.  He has owned a rental in North Vancouver for some 22 years without ever having filed an NR-6.  The CRA has slipped in not getting on top of it.
If you file your section 216(4) return on time you will be allowed to deduct the expenses.  If you are more than two years late, Canada will tax you on the gross at 25% and not allow you any deductions (In the same situation in the US, the penalty is 30% of the gross with no deductions).
I am going to reproduce another Montreal question I had a few months ago.
QUESTION: We understand that there is a 25% tax on 
gross rent from investment properties 
owned by non-canadians who have not 
filed their proper forms.  We were 
ignorant and knew not of what we were 
doing when we bought our rental 
property... which runs at a loss.  In 
Montreal the bienvenue tax is over six-
thousand dollars (this is the tax all new 
home-owners must pay in Montreal).  
Can we deduct this as a tax item on our 
federal return this year?  Next year we will 
have to be sure to fill out all the proper 
paperwork.... Thanks for your response.
david ingram replies
The 25% tax is a withholding tax, not a tax if you get the proper return in within 24 months.  You will have to pay the 25% first, but if we file a return under Section 216(4) with the proper whining letter, you will get it back if you actually lost money in the rental. In fact, the 2003 216(4) return is not actually due until June 30, 2004 so we do not even need a whining letter if you get it (the financial figures) here in the next ten days.
I would be happy to look after this for you because it is a sort of specialty.  All together, we lkikely prepare over 200 non-resident tax returns for Canadians with US property or Americans with Canadian Property.  Throw in a couple of Germans, a couple of Australians, a Spaniard, Italian, Swede and New Zealanders and even an Antartica worker and you can see that doing it by mail is simple.  An advantage of our doing it is that we can also prepare the US and State return with the proper tax credits and you do not need to try an train a local accountant.  (It can take 20 to 30 hours to figure it out the first time).
And, if you have a local accountant that you really want to use, we prepare a dummy US return with all the proper figures in the right place so that your accountant can just plug in the figures without having to work at it.
Let me know if I can help.
The Bienvenue Tax is considered a capital addition to the cost of the building.  We have a PPT (property purchase tax) in BC with the same characteristics.
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