resident buying rental in Canada and maybe moving in - international non-resident cross border income tax help estate family tru
Hello David,
I am booked for a 9 PM
consultation tonight (June 21st).
My wife and I are Canadians that
have been living in the US since 2002. I am on a HB-1 visa and my wife is
a dependent that is not working, I am also part way through a green card
application. I would like to figure out what I need to do to buy and
investment property in Alberta Canada without changing my tax status.
I
have 100% US income with no income from Canada, and have had no Canadian taxes
since the first full year here. We severed our significant ties when we
left and I am currently an deemed non-resident in Canada for tax purposes (and
would like to stay that way). I have heard of nightmares where people had
to pay on their world income in Canada because they purchased a house because it
was seen as a significant residential tie.
Question 1: How can I buy
investment property in Canada without affecting my tax /
residency status?
Question 2: What legal language do I use
when trying to secure a Canadian mortgage? Is there any reference
material?
Question 3: Should I be looking for a particular
type of mortgage firm? A particular type of
mortgage?
Question 4: What do I need to know come tax time? What reference material can I get to help?
size=5>* The CRA produces an excellent guide on rentals at- http://www.cra-arc.gc.ca/E/pub/tg/t4036/t4036-06e.pdf
* Aspecific Guide for electing as a non-resident is at
- http://www.cra-arc.gc.ca/E/pub/tg/t4144/t4144-06e.pdf
Your mother or someone else will have to become your Canadian Tax Agent.
CANADA
OVERALL - this is CRA site general info on non-resident rentals
- http://www.cra-arc.gc.ca/tax/nonresidents/notices/nr6_2005-e.html
* You should both sign and file Form NR-6 and a Pro-forma rental schedule BEFORE the first month's rental.
- http://www.cra-arc.gc.ca/E/pbg/tf/nr6/nr6-06e.pdf -
* Then, she will have to fill in forms NR4 and supplementaries before March 31st of the next year.
- http://www.cra-arc.gc.ca/E/pbg/tf/nr4sum/nr4sum-fill-04b.pdf (fillable form)
- http://www.cra-arc.gc.ca/E/pbg/tf/nr4_flat/nr4-fill-06b.pdf
* Then you have to fill in a Canadian T1 on forms 1159 and 776 by June 30th.
- http://www.cra-arc.gc.ca/E/pbg/tf/t1159/t1159-06e.pdf
- http://www.cra-arc.gc.ca/E/pbg/tf/t776/t776-fill-06e.pdf (fillable)
* You will have to fill in a CCA (capital cost allowance // depreciation) schedule which is part of the T776
USA
* You will convert the Canadian currency to US and put the numbers from form T776 on US form Schedule E
- http://www.irs.gov/pub/irs-pdf/f1040se.pdf - instructions at - http://www.irs.gov/pub/irs-pdf/i1040se.pdf
* US DEPRECIATION WILL GO ON us SCHEDULE 4562
- http://www.irs.gov/pub/irs-pdf/f4562.pdf - instructions - http://www.irs.gov/pub/irs-pdf/i4562.pdf
* If you paid any tax to Canada, it will go on US form 1116.
- http://www.irs.gov/pub/irs-pdf/f1116.pdf - instructions - http://www.irs.gov/pub/irs-pdf/i1116.pdf
Question 5: Can your firm help with taxes
for 2007? What are your rates for this type of tax situation?
Yes - it is what we do - Prices, etc., can be
found further below
Question 6: If we later move back can we move into this property and convert it to a non-income property that we live in what will happen?
If you move back to Canada and move into the property, you are deemed (considered) to have sold and reaquired the property and trigger an immediate capital gain. The profit would be calculated on schedule 3 and entered on the T1 tax return on line 127. HOWEVER You can then make an election under Section 45(3) to defer paying the tax until sale by putting the same amount on line 256 AND ATTACHING a letter making the election - There is no form, you have to write a letter.Warning - if you have been deducting depreciation in Canada, you will have to pay the tax 'now' on any depreciatioon claimed because you have now 'recaptured' the depreciation unless the price of the property went down.
Question 7: Is this type of purchase common? Is there any risk come tax season?
Yep, I have been recommending it for years so that someone can return to their place of origin at 'today's' price. If you want to retire to Florida or Vancouver Island or Hawaii or Great britain, I recommend that one go there now and buy a rental so that when retirement time comes, you KNOW you will have the funds to buy there. There is no tax risk - just a more complicated tax return. There IS the risk that property will NOT go up of course..Question 8: What have I missed? Do you have a check list for this type of thing?
Can't think of anything - You now have a check list as made up above. And, I will use it as a newsletter.
Looking forward to our call.
Regards,
XXXXXXXXXXXXXXX
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It is very unlikely that blind or unexpected email to me will
be answered. I receive anywhere from 100 to 700 unsolicited emails a
day and usually answer anywhere from 2 to 20 if they are not from existing
clients. Existing clients are advised to put their 'name and PAYING
CUSTOMER' in the subject and get answered first. I also refuse to be a
slave to email and do not look at it every day and have never ever looked at it
when i am out of town.
If an email is not answered in 24 to 36 hours, it is lost in space. You will have to phone to make an appointment. Gillian Bryan generally accepts appointment requests for me between 10:30 AM and 4:00 PM Monday to Friday VANCOUVER (Seattle, Portland, Los Angeles) time at (604) 980-0321
David Ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
If an email is not answered in 24 to 36 hours, it is lost in space. You will have to phone to make an appointment. Gillian Bryan generally accepts appointment requests for me between 10:30 AM and 4:00 PM Monday to Friday VANCOUVER (Seattle, Portland, Los Angeles) time at (604) 980-0321
David Ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325
North Vancouver, BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325
Calls welcomed from 10 AM to 9 PM 7 days a week Vancouver (LA) time - (please do not fax or phone outside of those hours as this is a home office)
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 legal practitioner or tax specialist
for expert help, assistance, preparation,
or consultation in connection with personal or
business affairs such as at www.centa.com. If you forward this message,
this disclaimer must be included."
David Ingram gives expert income
tax & immigration help to non-resident Americans & Canadians from
New York to California to Mexico family,
estate, income trust trusts Cross border, dual citizen - out of
country 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 www.centa.com or www.jurock.com or www.featureweb.com. David Ingram deals on a daily
basis with expatriate tax returns with multi jurisdictional cross and
trans border expatriate problems for the United States, Canada, Mexico,
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