Part II - Wife's Residence - Judge Teskey,

Sent: Thursday, January 13, 2005 9:38 AM
To: taxman at
Subject: Re: Wife's Residence - Judge Teskey, Dennis Lee Article IV of
US / Canada Income Tax treaty
Mr Ingram,
Thank you for your reply.
Just to confirm, are you saying that Immigration gives
the CRA the names and addresses (the only time I gave
Immigration the Canadian address was as a location to
mail the PR card) of all PRs...and that the CRA then
sends a tax demand to those addresses?
If so, could I simply wait for the demand to see
whether it arrives, or is the danger there that it may
not arrive for years, by which time they'd claim I owe
a huge tax?
Regarding 2004 (the year I received PR), I was not in
Canada anywhere near 180 days, so can I ignore that
year at least for Canadian tax purposes?
david ingram replies:
You have to file a Canadian return for 2004.
When you applied for and received and used your PR card, you were signing up
to pay Canadian income taxes on your world income from the day you first
came into Canada.  In fact, the tax liability started the day you came to
Canada, not the day you actually received the card.
You may, in fact be able to avoid them by maintaining your US identity and
not doing "anything" else that is Canadian.  However, to maintain the PR
card, you have to prove that you are in Canada for 730 days out of the five
years after getting it.  When you enter Canada with your PR card, you are
telling the People at the border that you are a Canadian Resident.
Canadian residents have to file tax returns if they have income from
"anywhere" in the world.
Our tax return has a spot on the front page that asks "when did you enter
Whatever you do, do NOT wait for them.  If you do, you will likely lose
because the whole system will be assuming you are taxable.  If you wish to
use article IV, you MUST be proactive and claim your exemption.  That way
you are in the driver's seat.  Otherwise you will be trying to backfill and
if they do not catch you for five years, the interest and penalties would be
HUGE if you lost.
Remember, that unless outright fraud is suspected, both Canada and the USA
only go back 3 years to amend or change a return that has been "filed".
However, both countries can go back as far back as they want to ask for
returns that were never done.  We are working on 87 to 2004, 89 to 2004, 91
to 2004 and 96 to 2004 returns right now for some very surprized people.
And Canada has just asked one lady client for Canadian returns back to 1998
even though she did not come to Canada until Sept, 2002.  The lady swears
she was never in Canada before then but she has been asked for Canadian
And remember, people are asked all the time for returns when they do not
have an official status in either country.  Your visa is just the icing on
the cake for the CRA.  The mere fact you are visiting Canada on a regular
basis gives Canada the right to ask for a return although it does not mean
you will be taxable when all the factors are taken into account.
Remember that in the reverse, the US could fine you $1,000 per year minimum
for not filing a return and then claiming a treaty exemption without having
filed the return on time with the proper treaty exemption form (Canada does
NOT have such an automatic penalty).
See the US Treaty Exemption form at
--- David Ingram <taxman at> wrote:
> -----Original Message-----
> From:
> Sent: Wednesday, January 12, 2005 10:37 PM
> To: taxman at
> Subject: Wife's Residence
> Dear Mr. Ingram,
> I’m a U.S. citizen with a home in the U.S.  I
> married
> a Canadian citizen with a home in Ontario.  We
> travel
> back & forth between the two residences, though each
> home is held in one name only.  I received permanent
> resident status in Canada so that I could never be
> refused entry at the Canadian border.  I work in the
> U.S., drive a U.S.-plated car, have a U.S. driver’s
> license, pay U.S. taxes, etc.  I have never
> encountered a problem at the border and I have
> nothing
> in my name in Canada.  My question is:  is it likely
> that the CRA will ever attempt to tax my U.S. income
> in Canada?  (What would ever even bring me to their
> attention?)  Looking at the tax treaty, I would
> think
> that the most they could say is that I have an
> habitual abode in both countries, which would mean
> (according to Article IV) that I should be taxed in
> the country in which I am a citizen.  If I went the
> route of filing both U.S. & Canadian taxes, besides
> the expense of always doing double taxes, I'd
> probably
> end up paying more tax (earned income: $50,000
> U.S.) that correct?
> Regards,
> Alf
> __________________________________________________
> david ingram replies:
> If you have applied for and received a PR card, the
> CRA will try and tax you
> and likely win if you come to their attention.
> You will automatically come to their attention when
> they demand a return
> from you because of the issuing of the PR card.
> The way you can win for sure is if you can prove
> that your wife is spending
> more time in the US with you than you are spending
> in Canada with her.
> The problem with that is she spends more than 120
> days a year three years in
> a row, she then becomes liable to file a US tax
> return.  If she is in the US
> more than 183 days in one year, she loses her
> Canadian Provincial medical
> coverage.
> Ideally, you would spend 200 days in the US and your
> wife would spend about
> 115 of them with you.  You could then spend the
> other 160+ days in Canada
> with her.  You would be apart about 90 days under
> that scenario.
> You should likely buy an hour of my time by phone
> sometime.
> Article IV is a very strong article but we have at
> least four returns under
> challenge by the CRA right now in similar situations
> to yours.  It is clear
> to me that the CRA is attempting to tax you and is
> working on a program to
> find everyone in your situation.
> Their presumption is that your personal ties are
> closer to Canada and
> therefore you are taxable on your world income in
> Canada.
> The Dennis Lee case following in a previous Q & A
> series is an example of a
> person with a Canadian wife being taxed by Canada
> during a time that the
> Canadian Government would not even give him
> permission to live with his wife
> in Canada.  Of course, there is no Article IV
> involved, but the intention of
> the CRA is very clear.
> The old question follows:
> ================================================
> david ingram replies:
> If you are an American Citizen living anywhere in
> the world, you must still
> file a US Income tax return no matter where you
> live, no matter what you
> work at, no matter where the money is paid from.
> You must also pay tax on
> any investment income from another country as well
> as the US.
> If you are a Canadian citizen living in a third
> country without an income
> tax treaty with Canada (such as the Caymans), you do
> not have to file a tax
> return in Canada if you have given up your Canadian
> medical, your Canadian
> driver's licences, Canadian Credit Cards, union
> memberships, house,
> apartment, cars, etc. You can have a non-resident
> bank account, keep your
> RRSP accounts (don't buy more), and even keep your
> family house and
> investment real estate if it is rented out to
> strangers on one year (or
> more) leases.
> If you are in any one of the 100+ countries that
> Canada has a treaty with,
> Article IV of the treaty kicks in and taxes you on
> world income in the
> country with which your closer connections can be
> determined.
> The following answer to a previous question and the
> included tax cases will
> give you an idea.  It is a small part of the
> US/Canada Income tax section
> which you can find at Pay attention
> to The Judge Teskey
> decision in Teskey.
> Hello
> I'm making a permanent move out of Canada November
> 15/2004 and also =
> retiring on the same date.  On January 1, 2005, I
> will receive a one =
> time lump sum payment from my employer for banked
> overtime.  The payment =
> will be included on my 2005 T-4 slip.  Will this
> payment affect Revenue =
> Canada's ruling as to me being deemed a non resident
> of Canada beginning =
> January 1, 2005? =20
> Please acknowledge receipt of this email and I will
> happily forward my =
> MasterCard number to you so you can charge me the
> appropriate amount.
> Sincerely,=20
> ---------------------------------------------
> david ingram replies
> This barely got to me and had been dumped by the
> system because it went to
> the board as a reply (I think) which it will not
> accept.
> questions should go to taxman at
> In and of itself, the T4 in 2005 does not make you a
> resident of Canada.
> Other items will be the defining factor.  For
> instance, if you go to live in
> any tax treaty country, Article IV of the treaty
> governs your residency for
> tax purposes.
> If you go to Panama or the Caymans or Bahamas, you
> have to pay real
> attention to anything Canadian.  I say that to be
> "sure", you stay out of
> Canada for two full years.
> No visits to kids,
> No visits to ex wives
> No bank accounts except a non-resident account with
> tax being withheld at
> source
> no Provincial driver's licence
> No furniture in storage
> BUT renting your old house out to a stranger on a
> long term basis is fine
> If someone needs to visit with you, "YOU" go to
> Niagara Falls New York or
> Calais, Maine or Pembina North Dakota or Bellingham
> in Washington and have
> your friends come down and visit you in the US for
> that first two years.
=== message truncated ===


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