US realtor asks - What CAN a Canadian do with property in the US.-

QUESTION: Aloha David
I am a US citizen living and working as a real estate agent in Maui, HI.  MANY Canadians own or are looking into owning condos here in South Maui and renting them out (when they are not here) to tourists to use for their vacation.  Can you help me clarify what the legal and tax issues are for these Canadian buyers?  Are they allowed to rent out their condos?  Can they rent it themselves?  Or MUST they use a US rental agent?  Can they come and do repairs on THEIR property?  It would seem from your answer in that they are not even allowed to come and change a light bulb!  And if that is the case, just who is "not allowing" them to do this? - the US or CANADA?  Thanks for your help on this.  I want to make sure that all of the Canadian buyers are getting the correct information.

david ingram replies:

I use to have a condo manager friend Howard ?? in Maui.  He was a friend in Vancouver in 1965 when he managed CKLG-FM radio station.  He then left and moved to Maui and got into the condo business.  I am embarrased that I do not remember his last name but i have not seen him since 1979 when I rented a condo from him in Kihei.  

Back to your question. 
You have become a very powerful person.  With your knowledge, you now hold the ability to have a lot of Canadians arrested and deported.  You could even report them for something that they did two years ago.

1.   Canadians or Japanese or Koreans or Austalians can buy a condo or $5,000,000 waterfront estate in Hawaii, New York or Palm Springs and rent it out.

2.    They can even show the property themselves.  They can NOT however, collect the rent themselves.  They can hand the person an envelope and instruct them to mail the chwques to Canda or Australia or Japan or give them written instructions to direct deposit the money into a Hawaii Bank Account.  They just can NOT accept the money at the same time they show the property. 

If they want to accept the money themselves, they can fly back to Canada and turn around and pick up the money and return to Canada immediately. The Canadian, or, or, or just can't do anything else while picking up the money.  If the renter said they needed a new refridgerator while the Canadian was picking up the check (or maybe a year's supply), the Canadian could not go over to a Home Depot and  order a new fridge on the same trip.

On a trip that they do not pick up money, the Canadian can hire a property manager, hire a repair crw, hire someone to change the light bulb, shovel a sidewalk, cut the lawn, etc.

3.   On any trip, the Canadian himself or herself can NOT change a light bulb,cut the lawn, fix a toilet, paint a bedroom, shovel a sidewalkor fix the doorebell on a unit that they are renting or intending to rent in the future or that they have bought to improve and sell.

4.   It is US immigration law that prevents the Canadian from working on his or her rental property.

However, the Canadian can supervise the renovations or repairs as long as he or she hires US residents to do the work.

If the Candian wanted to start a business of renovating and flipping, he or she could get an E2 visa which  would allow them to be there and work on their own or even others houses. 

If they wanted to spend $1,000,000 and hire ten employees fotr two years, they could an instant green card by applying for and getting an E-5 visa.

5.   Every Canadian owner also needs to collect Hawaii 4%GET (General Excise Tax) if they rent it on a long term and 6% TAT (Transient Accomodation Tax) if rented for short term rentals of 180 days or less to a person who has another home somewhere else, even if it is in Hawaii.  As you can see, every rental to a Canadian requires the TAT and GET.  The Canadian should collect 11.1111 % tax because taxes are levied on each other which should cover both. 

If they do not collect it and Hawaii gets hold of them, the retroactive tax can be massive.  I had one that was over $87,000 for back GET and TAT against a Candian who collected all of her rents in Canada. Even though she had a legitimate rental loss on a very expensive property when Hawaii caught up to her, they issued her a retroactive bill plus large penalties and interest. 

So, 'If'  the Canadian wants to collect rent "in" Canada from Canadians for seasonal rentals, that is fine.  However, they also have to collect the TAT and GET taxes in Canada on their transient rentals or end up in trouble later on. 

When Can the Canadian do the work.

If the Canadian or, or, or wanted to buy a piece of vacant land, they could build a whole house themselves including foundation, framing, drywall, roofing electric, plumbing, heat pump and landscaping IF it was just for their own use. 

If they own a condo, they can do any remodelling to their own condo or their own mobile home or their own

However, their Canadian adult children, Canadian Friends or Canadian trades can NOT come down and work on the weekend.  They can NOT let a Canadian friend who just happens to be a remodeller, go down and stay in the unit while they change the kitchen. 

I first had this explained to me on a 72 Foot converted minesweeper named Montagnais in Ketchikan, Alaska in May 1975.  I was changing over a hot water tank on this boat (which i was a guest on from Vancouver to Ketchikan) and when the customs and immigration people came on board to clear the boat and personnel through customs, I was chastised by them for working on the boat.  Today, it would be arrest and imprisonment.
Several months later, the same thing happened at Mount Baker when the INS threw a bunch of guys I knew out of the US for working on a friend's ski cabin. 

Thirty-three years later I have heard the story 1,000 times and they get progressivley worse.

The Canadian, of course has to file both a Federal 1040NR return with a schedule E and 4562 to report the rental income federally.  In addition, they have to File a hawaii N-15 Non-resident return and the Hawaii GET and TAT return

On February 11, 2008, David Ingram wrote:

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 line 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. 
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However, I regularly search for the words"PAYING CUSTOMER" and always answer them first if they did not get spammed out. For the last two weeks, I have just found out that my own email notes to myself have been spammed out and as an example, as I wrote this on Dec 25, 2007 since June 16th, my 'spammed out' box has 47,941 unread messages, my deleted box has 16645 I have actually looked at and deleted and I have actually answered 1234 email questions for clients and strangers without sending a bill.  I have also put aside 847 messages that I am maybe going to try and answer because they look interesting. -e bankruptcy expert  US Canada Canadian American  Mexican Income Tax service and  help
Therefore, if an email is not answered in 24 to 48 hours, it is likely lost in space.  You can try and resend it but if important AND YOU TRULY WANT OR NEED AN ANSWER from 'me', 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 expert  US Canada Canadian American  Mexican Income Tax  service and help.
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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 legal practitioner or tax specialist for expert help, assistance, preparation, or consultation  in connection with personal or business affairs such as at If you forward this message, this disclaimer must be included." e bankruptcy expert  US Canada Canadian American  Mexican Income Tax  service and help.
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Phone consultations are $450 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or is to be returned to Canada or a phone consultation is in Canada. ($472.50 with GST if in Canada) expert  US Canada Canadian American  Mexican Income Tax  service and help.
This is not intended to be definitive but in general I am quoting $900 to $3,000 for a dual country tax return.
$900 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only (but were filing both countries) - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
$1,200 would be the same with one rental
$1,300 would be the same with one business no rental
$1,300 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.
$1,600 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

$1,700 would be for two people with income from two countries

$3,000 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 $200.00 up.
With a Rental for $400, two or three rentals for $550 to $700 (i.e. $150 per rental) First year Rental - plus $250.
A Business for $400 - Rental and business likely $550 to $700
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 $900 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.

Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be from $150 to $600.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc. Note that these returns tend to be informational rather than taxable.  In fact, if there are children involved, we usually get refunds of $1,000 per child per year for 3 years.  We have done several catch-ups where the client has recieved as much as $6,000 back for an $1,800 bill and one recently with 6 children is resulting in over $12,000 refund. 

This is a guideline not etched in stone.  If you do your own TDF-90 forms, it is to your advantage. However, if we put them in the first year, the computer carries them forward beautifully.
This from "ask an income trusts tax service and immigration expert" from or or 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, Great Britain, United Kingdom, Kuwait, Dubai, Saudi Arabia, Thailand, Indonesia, Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK, GB, and any of the 43 states with state tax returns, etc. Rockwall, Dallas, San Antonio Houston, Denmark, Finland, Sweden Norway Bulgaria Croatia Income Tax and Immigration Tips, Income Tax  Immigration Wizard Antarctica Rwanda Guru  Consultant Specialist Section 216(4) 216(1) NR6 NR-6 NR 6 Non-Resident Real Estate tax specialist expert preparer expatriate anti money laundering money seasoning FINTRAC E677 E667 105 106 TDF-90 Reporting $10,000 cross border transactions Grand Cayman Aruba Zimbabwe South Africa Namibia help USA US Income Tax Convention. Advice on bankruptcy  e bankruptcy expert  US Canada Canadian American  Mexican Income Tax service and help .

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