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Splitting capital gain and investment income, where should we attach the T5 &T3 to?

QUESTION:
My wife and I have a joint investment account for about 7 years and have our own individual investment accounts for different length of time(3years for her,2 years for me).

1. For the last 7 years I have declared all the capital gains and investment income of our joint account and my individual account on my income tax return which is pure ignorance and to our disadvantage even though the the total amount was not large.

2. Now we want to declare 50%/50% of our capital gain and investment income of our joint account because the amount is becoming quite significant.

3. Can we just ignore the past and start to do this now?Do we need to explain to CRA?Do I need to attach all the T5 and T3 slips on both of our returns?(Then we would have no copies of our own.)

We thank you very much for the help!

Regards.
_________________________________________________________
david ingram replies:


1. Under Section 74.1 of the Canadian Income Tax Act, The account is taxable to the spouse who put the money into the account. Therefore, If you gave her $10,000 and she puts it into an account in her name, any earnings in that account on the first $10,000 is taxable to YOU forever. The earnings on the earnings are taxable to her however.

Therefore, if you put the money into the joint account seven years ago, any earnings on the original amount or any further amounts you put in are correctly taxable to you. These are called the 'Attribution Rules'.

But, if the earnings were left in the plan, 1/2 of the earnings on the earnings would be taxable to her.

On the other hand, if the joint account was an inheritance from her father and was put into a joint account, the reverse would be true and everything on the original amount would be taxable to her with 1/2 of the earnings on the earnings taxable to you.

The same is true of the individual accounts you have.

Your question is really based upon, 'what happens if you suddenly switched'? The answer is that in 43 years in this business with 155 offices of my own in 5 provinces and the management of H & R Block offices before that in three provinces, I have only seen the tax office go after two couples under the attribution rules. And that involves the preparation of well over 3,000,000 tax returns over .

The ONLY ones I saw were H & R Block clients in Saskatchewan. One was in Kipling Saskatchewan and the other in Weyburn Saskatchewan and I won both by tracing minor amounts of money that the wives had earned and saved during World War II as being justification for the husbands splitting the proceeds from the family farms which were sold 30 years later. The farms, of course, were only in the Husband's names under the VLA (Veteran's Land Act) rules but it was the $1,000 or $1,500 that the wives had saved which was used to get the farms going.

In your case, it may be that if you gave your wife the money, you were just paying her back while she supported you through electrical engineering.

In truth, you need to do a spread sheet and figure out what is what 'just in case'.

It may be that the split should be 38% <> 62% or 20% <> 80% or 49% <> 51% but you can certainly make the switch without much worry about being questioned by the CRA, particularly since Stephen Harper's government is clearly on track for a joint tax return sometime in the future.

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Giving Up US citizenship = retaining your services?

Hello-- I am a US citizen and resident of Los Angeles. I am considering immigrating to Vancouver  to avoid estate taxes (and because I really like Canada). I'll be inheriting a large amount of money when my parents pass away, and their estate will be taxed under the US system. I hate the idea, though of paying it AGAIN when I die and leave it to my kids.   I also have real estate investments in California that I intend to keep and also leave to my kids. These make over $100,000 net per year. Part of my parents' estate will become a charitable foundation, of which I will be administrator, and recieve $150,000 annually. In addition to these two sources of income, much of my inheritance will be in the form of bonds (mostly tax free), interest on which may be in the neighborhood of $750,000. So, I am assuming my retiremnt income will be in the neighborhood of $1 million/year.   I am now 50 years old, and my kids are 9 and 12. I think maybe I should start planning on how to avoid heavy taxes now and would very much appreciate your feedback. Please get ahold of me by phone or e-mail.   Thanks, _______________________________________________________________________________-
david ingram replies:

Immigrating to Canada will NOT ELIMINATE US ESTATE TAXES UNLESS YOU GIVE UP YOUR US CITIZENSHIP in which case, you would have a departure tax to the US where everything is considered sold the day you move and where you can NOT ever go back to the US unless for your funeral without special and usually expensive  approval.

I am just too busy for the next week to answer this in any detail and it is too specific for the usual question on this site.

The above was free.

I do charge for the kind of consultation(s) you would need.

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Work outside the USA in NORWAY

QUESTION:

I am USA born and got a job in norway do I have to pay income tax to USA if I earned the money in Norway __________________________________________________
david ingram replies:

A US Citizen is taxable wherever they live.  If you are gone for 330 out of 365 days or a full calender year, you can exempt up to $82,400 of income by filing form 2555.  If you are earning over $82,400, you can claim a foreign tax credit for the taxes paid to Norway by filing form 1116.

If you go to www.centa.com and read the US/Canada Taxation section in the second box down, it will teach you a lot because Article IV of the US Norway and Article IV of the US Canada Tax convention (treaty) are very similar and the information for you as a US citizen living in a tax treaty country should be right on.

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TN-1 Visa Job Title Qualifications

Hello David;       I am a seasoned computer professional and I am currently entertaining an exciting opportunity with a company in the U.S. Since I am a Canadian citizen, I would require a work visa to do so.       The H1B for 2006 have long since been exhausted so then there is the TN-1 Visa.       Would Computer Operations Supervisor be eligible for a TN-1 Visa or does the term "Supervisor" negate the eligibility requirements of a TN-1 Visa?        I heard that "management" in the computing profession must obtain an H1B visa to be legally entitled to work in the U.S.       Your advice is most welcome.   Cheers,  
david ingram replies:

As described, you need an H1 visa.  The 'only' computer TN visa possible is as a 'computer systems analyst' which does not have any supervisory role to it.

You are going to have to get in line for an H1B visa.
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W4 Issues: Dual Citizen Living in Canada, telecommuting to US

Hi David and Partners, 

I think I am in need of some serious US/Canada tax advice by telephone, and
help in filling out my forms.

My problem is as follows and I would appreciate if there is anything,
immediately, I should be doing to resolve this:


I am a dual Canadian/US citizen, married to a Canadian citizen living in
Montreal, Canada, where we own a house, have health cards, etc. I
telecommute with 4 US companies, and have a small Canadian business income
from my own business. My wife also has a very small Canadian business income
from her own business.

I originally filled out my W4 for these US companies with a US address
across the border where we often visit, collect mail, etc., and have a bank
account (we used to live and work in the US from 2000-03). I was under the
impression that that was sufficient enough for them to withhold tax on my
income, given that I am a US citizen. I would then claim the tax back in my
tax claims to both countries. This I have done in my 2003, 04 and 05 tax
forms and tax was returned to me as asked. In my US tax forms I noted that I
live permanently in Canada, filing Form 2555 each year, and form 90-22.1. In
my Canadian tax forms I note the income as foreign.

I have not informed US social security that I live in Canada, and only
learned recently that that should have been done. SS is withheld on my US
pay stubs, however I typically get all social security fees back when I
submit my tax forms to the US.

I am NOW of the understanding that the US employers may be subject to fines
for hiring me as a Canadian resident, and I may be subject to fines for
filling out the W4 incorrectly. My employers have no provisions for hiring
Canadian residents, and were I to fill out my W4 with a Canadian address,
they would probably cancel my employment.

How do I make this situation normal and legal? Did I, in fact, fill out the
W4 incorrectly? If it was incorrect, as I see it, I have two options:

1. Inform my employers I live in Canada and thus lose my work. Prepare for
criminal charges, getting fined and/or sued by the employers for an
incorrect W4 statement of residence. Perhaps re-submit previous tax forms,
but I am not sure why. I probably should tell US social security where I am
officially too.

2. Move to the US right away. Dispose of all Canadian assets (house, bank
accounts, RRSPs). Still be prepared for fines, however, my W4 would now be
"correct" and, hopefully, my work secure. And yet even with this option I
fear that 3 years of incorrect W4s will net me fines, and perhaps my
employers will get fines, and I still may lose my job.

Thanks for your help with this tricky situation. There are other
complications, but I think this is the biggest one for now.
_______________________________________________________________
david ingram replies:

Do not worry about criminal charges.  That will not happen.  Your only problem is that you are paying into the US Social Security system which is not doing you any good as far as foreign tax credits are concerned. 

Without seeing you r returns, I really can not advise more However, for the future, you should have your three employers pay you what they were paying plus the extra payroll benefits they are paying and issue you a 1099 instead of a W2.

You know where we are if you need help to straighten it out.  I am very good working with employers in this case.

This older reply will help you.
QUESTION:

Hi,

I'm an American citizen residing in Canada (permanent resident) and working for an American company remotely from home in Canada. I get a W2 at year-end. I assume I have to file both US and Canadian tax returns.

My questions are :
1) Do I file a US tax return and claim a foreign tax credit on my Canadians tax return. Or is it vice versa?
2) Do I still file state/local tax return in the US (I lived in Maryland prior to landing in Canada), even though I now reside in Canada?
3) For the extra tax I end up paying to the 2nd country (in excess to what I pay to the first country), can I claim any type of credit or deductions on that tax in next tax year?

Thank you very much!


====================================================
david ingram replies:

If you are working in Canada, you should not be getting a W-2.  The reason is that as a reasident of Canada, you should not be paying into US Social Security or Medicare or paying basic income tax to the USA.

Your first tax liability for services rendered in Canada under Article IV of the US Canada Incomne Tax Treaty is to Canada.

You should be filing a Candian T1 return and paying Canada and provincial income tax first.  Then you would file your US return and either:

1.    Use form 2555 to exempt up to $82,400 of income from US tax and then file US form 1116 to claim a foreign tax credit on the excess OR

2.    Use form 1116 to claim the foreign tax credit onyour US return for tax paid to Canada.  If you have children, you woul dusually do the latter because it would usually qualify you for the $1,000 per child USA refundabvle tax credit.

3.    In the case of interest (10%) and dividends (15%), you must get any excess tax back from the US by reclassifying the income on form 1116.

4.    In the case of interest, you can claim the difference between 10 and 15% as a deduction on Canadian schedule 4.

5.    You should NOT be paying into a US 401(K) or US Social Security. Canada will not allow the 401(K) as a deduction.

Your employer should start paying you on a 1099 Basis and pay you your salary plus their share of Social Security plus their share of Medicare plus their share of any 401 or other pension plan they contruibute to.
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Foreign property over $100, 000 - Form 1135

QUESTION:

I realize that if I own property outside Canada valued over CAD 100,000 I need to declare it to the CRA. That was no problem to me until 2006 when a hot real estate market in India pushed the price of my property up over the limit. My  question is : On what basis should I apply the 100,000 dollar rule? The current market price converted to CAD? (which is  120,000 CAD) Or the cost basis? (I paid 20,000 CAD for the property in 1999)

The property does not generate any income.
__________________________
  david ingram replies:

cost price - you do not need to report its existence on form 1135  if you paid less than $100,.000.  However, if you paid $5,000 and it got $100 rent a year, you would have to report the rent, just not form 1135.
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QUEBEC VERSUS NEW YORK - cross border motorcycle

I am a US citizen with permanent residence in Canada.  I would like to buy and insure a motorcycle in the US with my brother.  In New York two owners can register a motorcycle at once.  I maintain a part-time residentce in New York and still have my New York license (motorcycle).  Would it be legal to operate this bike in Quebec under these criteria?  In order to get a Quebec motorcycle license you must take a course, and I have already done that in New York....  Please let me know if you have a minute what you think.


_________________________________________________________
david ingram replies:

I am amazed that I am answering this today BUT!

If you have a Quebec driver's licence and Quebec medical, you better get a Quebec motorcycle licence.

In addition, you have to pay duty to bring the motorcycle (driving or trailered) into Canada because you are a resident of Canada.

Do it right.  As the survivor of a couple of neat motorcycle accidents (one right on the border on top of a mountain at Ossoyos, BC), I can not encourage you enough to do it right.
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US CANADA SOCIAL SECURITY TOTALIZATION AGREEMENT

QUESTION: My appologies if this questions have asked many times before.I coudnt not find right and easy answer for this.
I am a Canadian citizen working in USA under TN visa for last 2 yrs. I wonder what will happen for social security tax i pay in USA.Does it goes to Canadian social security.Is it possible to get refund ?

Thanks in advance.
__________________________________________________________
david ingram replies;

The US Canada Social security Totalization Agreement means that you will be able to collect Social Security from the US when you retire whether you have 1 year or 13 or 40 years of input.
The agreement in all its glory CAN BE FOUND AT:
http://www.socialsecurity.gov/international/Agreement_Pamphlets/canada.html

AND IS REPRODUCED HERE:
International Programs Home link to Social Security Online home Totalization Agreement with Canada
(Based on SSA Publication #05-10198, ICN 480199)




OMB Approval Number: 0960-0554

Expires 11/30/07







Table of contents
Skip link group


Part I -- Introduction
  • The agreement may help you, your family and your employer
Part II -- Coverage and Social Security taxes
  • Summary of agreement rules
Part III -- Certificate of coverage
  • Certificates for employees
  • Certificates for self-employed people
  • Effective date of coverage exemption
Part IV -- Monthly benefits
  • How benefits can be paid
  • How credits get counted
  • Computation of U.S. benefit under the agreement
Part V -- A CPP/QPP pension may affect your U.S. benefit
Part VI -- What you need to know about Medicare
Part VII -- Claims for benefits
  • Payment of benefits
  • Absence from U.S. territory
  • Appeals
Part VIII -- For more information End of link group



Part I -- Introduction An agreement effective August 1, 1984, between the United States and Canada improves Social Security protection for people who work or have worked in both countries. It also helps protect the benefit rights of people who have earned Canadian Social Security credits based on residence and/or contributions in Canada.

Because the Canadian Social Security system includes a special pension plan operated in the Province of Quebec, an additional understanding has been concluded with Quebec to extend the agreement to that province—also effective August 1, 1984. Terms of the U.S.-Canadian agreement and U.S.-Quebec understanding are very similar, and except where otherwise noted, references in this document to the U.S.-Canadian agreement also apply to the U.S.-Quebec understanding.

The agreement with Canada helps many people who, without the agreement, would not be eligible for monthly retirement, disability or survivors benefits under the Social Security systems of one or both countries. It also helps people who would otherwise have to pay Social Security taxes to both countries on the same earnings.

For the United States, the agreement covers Social Security taxes (including the U.S. Medicare portion) and Social Security retirement, disability and survivors insurance benefits. It does not cover benefits under the U.S. Medicare program or the Supplemental Security Income program. For Canada, the agreement applies to the Old-Age Security program and the Canada Pension Plan. The understanding with Quebec applies to the Quebec Pension Plan.

This document covers highlights of the agreement and explains how it may help you while you work and when you apply for benefits.





The agreement may help you, your family and your employer
  • While you work––If your work is covered by both the U.S. and Canadian Social Security systems, you (and your employer, if you are employed) would normally have to pay Social Security taxes to both countries for the same work. However, the agreement eliminates this double coverage so you pay taxes to only one system (see Part II).

  • When you apply for benefits––You may have some Social Security credits in both the United States and Canada but not have enough to be eligible for benefits in one country or the other. The agreement makes it easier to qualify for benefits by letting you add together your Social Security credits in both countries. For more details, see the section on "Monthly benefits" in Part IV.



Part II -- Coverage and Social Security taxes Before the agreement, employees, employers and self-employed persons could, under certain circumstances, be required to pay Social Security taxes to both the United States and Canada for the same work.

Under the agreement, if you work as an employee in the United States, you normally will be covered by the United States, and you and your employer will pay Social Security taxes only to the United States. If you work as an employee in Canada, you normally will be covered by Canada, and you and your employer will pay Social Security taxes (contributions) only to Canada.

On the other hand, if your employer sends you from one country to work for that employer or an affiliate in the other country for five years or less, you will continue to be covered by your home country and you will be exempt from coverage in the other country. For example, if a U.S. company sends an employee to work for that employer or an affiliate in Canada for no more than five years, the employer and the employee will continue to pay only U.S. Social Security taxes and will not have to pay in Canada. Even if your occupation (such as truck driver or professional athlete) requires you to make frequent short trips from one country to the other over a period of more than five years, each trip can be considered separately so that you remain covered only by the country from which you are sent.

If you are self-employed and residing in the United States or Canada, you generally will be covered and taxed only by the country where you reside.





Summary of agreement rules The following table shows whether your work is covered under the U.S. or Canadian Social Security system. If you are covered under U.S. Social Security, you and your employer (if you are an employee) must pay U.S. Social Security taxes. If you are covered under the Canadian system, you and your employer (if you are an employee) must pay Canadian Social Security taxes (contributions). Part III explains how to get a form from the country where you are covered that will prove you are exempt in the other country.






Your work status


Coverage and taxes


You are working in Canada/Quebec:


For a U.S. employer who:


  • Sent you to work in Canada/Quebec for five years or less
U.S.


  • Sent you to work in Canada/Quebec for more than five years
Canada/Quebec


  • Hired you in Canada/Quebec
Canada/Quebec


For a non-U.S. employer


Canada/Quebec


For the U.S. government


Write to the U.S. address in Part III.A below for further information.


You are working in the U.S.:


For an employer in Canada/Quebec who:


  • Sent you to work in the U.S. for five years or less
Canada/Quebec


  • Sent you to work in the U.S. for more than five years
U.S.


  • Hired you in the U.S.
U.S.


For a non-Canadian/Quebec employer


U.S.


For the Canadian/Quebec government


Write to the appropriate Canadian address in Part III.A below for further information.


You are self-employed and you:


  • Reside in the U.S.
U.S.


  • Reside in Canada/Quebec
Canada/Quebec


If this table does not seem to describe your situation and you are:


  • Working in the U.S.
Write to the U.S. address in Part III.A below for further information.


  • Working in Canada/Quebec
Write to the appropriate Canadian address in Part III.A below for further information.



NOTE: As the table indicates, a U.S. worker employed in Canada can be covered by U.S. Social Security only if he or she works for a U.S. employer. A U.S. employer includes a corporation organized under the laws of the United States or any state, a partnership if at least two-thirds of the partners are U.S. residents, a person who is a resident of the U.S. or a trust if all the trustees are U.S. residents. The term also includes a foreign affiliate of a U.S. employer if the U.S. employer has entered into an agreement with the Internal Revenue Service (IRS) under section 3121(l) of the Internal Revenue Code to pay Social Security taxes for U.S. citizens and residents employed by the affiliate.





Part III -- Certificate of coverage A certificate of coverage issued by one country serves as proof of exemption from Social Security taxes on the same earnings in the other country. Generally, you will need a certificate only if you will be working in the other country for more than 183 days in a calendar year. If you will be in the other country for 183 days or less, a certificate will not be needed unless the other country requests that you obtain one.






III.A. Certificates for employees To establish an exemption from compulsory coverage and taxes under the Canadian system, your employer must request a certificate of coverage (form USA/CAN 101 or USA/ QUE 101) from the U.S. at this address:

Social Security Administration
Office of International Programs
P.O. Box 17741
Baltimore, Maryland 21235-7741
U.S.A.


The request may be sent by FAX, if preferred, to (410) 966-1861. Please note this FAX number is only for requesting certificates of coverage.

No special form is required to request a certificate but the request must be in writing and provide the following information:

  • Full name of worker;
  • Date and place of birth;
  • Citizenship;
  • Country of worker’s permanent residence;
  • U.S. Social Security number;
  • Date of hire;
  • Country of hire;
  • Name and address of the employer in the U.S. and Canada; and
  • Date of transfer and anticipated date of return.
In addition, your employer must indicate if you remain an employee of the U.S. company while working in Canada or if you become an employee of the U.S. company’s affiliate in Canada. If you become an employee of an affiliate, your employer must indicate if the U.S. company has an agreement with the IRS under section 3121 (l) of the Internal Revenue Code to pay U.S. Social Security taxes for U.S. citizens and residents employed by the affiliate and, if yes, the effective date of the agreement.

Your employer can also request a certificate of U.S. coverage for you over the Internet using a special online request form available at www.socialsecurity.gov/coc. Only an employer can use the online form to request a certificate of coverage. A self-employed person must submit a request by mail or fax.

To establish your exemption from coverage under the U.S. Social Security system, your employer in Canada must request a certificate of coverage from Canada as follows:

  • If your work will remain covered by the Canada Pension Plan, obtain a certificate (form CPT 56A) from:

    CPP/EI Rulings Department
    Department of National Revenue
    Seventh Floor
    333 Laurier Avenue West
    Ottawa, Ontario
    CANADA K1A OL9


  • If your work will remain covered by the Quebec Pension Plan, obtain a certificate (form QUE/USA 101) from:

    Bureau des ententes de sécurité sociale
    Régie des rentes du Québec
    1055, René-Lévesque Est, 13e étage
    Montréal, Québec
    CANADA H2L 4S5


The same information required for a certificate of coverage from the United States is needed to get a certificate of coverage from Canada or Quebec except that you must show your Canadian social insurance number rather than your U.S. Social Security number.





III.B. Certificates for self-employed people If you are self-employed and would normally have to pay Social Security taxes to both the U.S. and Canadian systems, you can establish your exemption from one of the taxes.

  • If you reside in the United States, write to the Social Security Administration at the address in Part III.A above; or
  • If you reside in Canada, write to the appropriate Canadian address in Part III.A above.

Be sure to provide the following information in your letter:

  • Full name;
  • Date and place of birth;
  • Citizenship;
  • Country of permanent residence;
  • U.S. and/or Canadian Social Security number;
  • Nature of self-employment activity;
  • Dates the activity was or will be performed; and
  • Name and address of your trade or business in both countries.


III.C. Effective date of coverage exemption The certificate of coverage you receive from one country will show the effective date of your exemption from paying Social Security taxes in the other country. Generally, this will be the date you began working in the other country.

Certificates of coverage issued by either the Department of National Revenue in Ottawa or the Bureau des ententes de sécurité sociale in Montreal should be retained by the employer in the United States in case of an audit by the IRS. No copy should be sent to IRS unless specifically requested by IRS. However, a self-employed person must attach a photocopy of the certificate to his or her income tax return each year as proof of the U.S. exemption.

Copies of certificates of coverage issued by the United States will be provided for both the employee and employer. It will be their responsibility to present the certificate to the Canadian or Quebec authorities when requested to do so. To avoid any difficulties, your employer (or you, if you are self-employed) should request a certificate as early as possible, preferably before your work in the other country begins.

If you or your employer request a certificate of coverage, you should read the Privacy Act and Paperwork Reduction Act Statements below.






Authority to collect information for a certificate of coverage


Privacy Act


The Privacy Act requires us to notify you that we are authorized to collect this information by section 233 of the Social Security Act. While it is not mandatory for you to furnish the information to the Social Security Administration, a certificate of coverage cannot be issued unless a request has been received. The information is needed to enable Social Security to determine if work should be covered only under the U.S. Social Security system in accordance with an international agreement. Without the certificate, work may be subject to taxation under both the U.S. and the foreign Social Security systems.

Paperwork Reduction Act Notice


This information collection meets the clearance requirements of 44 U.S.C. section 3507, as amended by section 2 of the Paperwork Reduction Act of 1995. You are not required to answer these questions unless we display a valid Office of Management and Budget (OMB) control number. We estimate that it will take you about 30 minutes to read the instructions, gather the necessary facts, and write down the information to request a certificate of coverage.








Part IV -- Monthly benefits The following table shows the various types of Social Security benefits payable under the U.S. and Canadian Social Security systems and briefly describes the eligibility requirements for each type of benefit. If you do not meet the requirements for these benefits, the agreement may help you to qualify (see Part IV.A below).

We should point out that Canada provides old-age, survivors and disability benefits through two different programs. The Old-Age Security (OAS) program pays a flat-rate benefit to people age 65 or older based on periods of residence in Canada. The Canada Pension Plan (CPP) and the Quebec Pension Plan (QPP) pay retirement, survivors and disability pensions based on a worker’s earnings and total years of coverage beginning January 1, 1966 (when CPP and QPP started).

This table is only a general guide. You can get more specific information about U.S. benefits here on our web site, at any U.S. Social Security office or by calling our toll-free number at 1-800-772-1213. More detailed information about the Canadian system may be obtained by writing to the appropriate Canadian address in Part VIII or by visiting the Department of Human Resources Canada or the Régie des rentes de Québec.

Under U.S. Social Security, you may earn up to four credits each year depending on the amount of your covered earnings. For example, in 2005, you get one credit for each $920 of your covered annual earnings up to a maximum of four credits for the year. Under the Canadian system, credits are measured in years. To simplify the information in the table, U.S. requirements are shown in years of credits.





Monthly benefits and eligibility requirements
Retirement or old-age benefits
United States Canada
Full benefit at full retirement age, or reduced benefit as early as age 62. Required work credits range from one and one-half to 10 years (10 years if 62 in 1991 or later). OAS-An Old-Age Security pension is paid to anyone in Canada who is at least 65 and has been a resident of Canada for at least 10 years after age 18. This benefit is payable outside Canada for only 6 months following the month of departure from Canada unless the person has at least 20 years of Canadian residence after age 18. No work credits are required.


A supplementary benefit called Guaranteed Income Supplement (GIS) is paid to OAS beneficiaries living in Canada who have little or no income beyond the OAS benefit. GIS is payable outside Canada for only 6 months following the month of departure from Canada.

CPP-Worker can get full pension at age 65 or reduced pension as early as age 60. Only one contribution (1 year coverage) required.

QPP-Same as CPP.


Disability benefits
United States Canada
Under full retirement age can get benefit if unable to do any substantial gainful work for at least a year. One and one-half to 10 years credit required depending on age at date of onset. Some recent credits also needed unless worker is blind. OAS-No provision.

CPP-Worker under 65 must have a physical or mental disability which prevents any substantial gainful work and will be of long and indefinite duration or result in death. Worker must have contributions in four of the last six years.

QPP-Definition of disability same as CPP. Worker must have contributions in:
  • 1/2 the years in the contributory period with a 2-year minimum; or
  • 5 of the last 10 years in the contributory period; or
  • 2 of the last 3 years in the contributory period, or 2 years if the contributory period is 2 years.
Family benefits to dependents of retired or disabled people
United States Canada
Spouse-Full benefit at full retirement age or at any age if caring for worker's entitled child under age 16 (or disabled before age 22). Reduced benefit as early as age 62 if not caring for a child. Spouse-

OAS-An allowance is paid to the spouse or common-law partner (whether of the same or different sex who have lived together for at least one year) of an OAS pensioner when the couple has little or no income. The spouse or common-law partner must be age 60-64 and the OAS beneficiary must also be receiving GIS. The allowance is payable outside Canada for only 6 months following the month of departure from Canada.

CPP-No provision for benefits. However, under certain conditions, retirement pensions can be shared by married spouses if they are not legally separated.

QPP-Same as CPP.
Divorced spouse-Full benefit at full retirement age. Reduced benefit as early as age 62. Must be unmarried and have been married to worker for at least 10 years. Divorced spouse-

OAS-No provision.

CPP-No provision for benefits. However, total earnings credited to the couple during the marriage (while they lived together) may be split equally upon a divorce or legal annulment which occurred after 1977.

QPP-No provision for benefits. Provision on earnings splitting similar to CPP.
Children-If unmarried, up to age 18 (age 19 if in an elementary or secondary school full time) or any age if disabled before age 22. Children-

OAS-No provision.

CPP-No provision for children of retired worker. Children of disabled worker up to age 18 (or age 25 if in school full time).

QPP-No provision for children of retired worker. Children of disabled worker up to age 18 (or age 25 if in school full time and worker died or became disabled prior to 1/1/94).
Survivors benefits
United States Canada
Widow or widower-Full benefit at full retirement age or at any age if caring for the deceased's entitled child under age 16 (or disabled before age 22). Reduced benefit as early as age 60 (or age 50 if disabled) if not caring for child. Benefits may be continued if remarriage occurs after age 60 (or age 50 if disabled). Widow or widower-

OAS-An allowance is payable to widowed spouses or common-law partners (whether of the same or different sex) age 60-64 with little or no income. The common-law partner must have lived with the deceased for at least one year. The allowance is payable outside Canada for only 6 months following the month of departure from Canada.

CPP-Age 35 or older, or under age 35 if disabled or maintaining dependent child of the deceased spouse or common-law partner (whether of the same or different sex). In addition, a same-sex common-law partner can qualify for benefit only if the worker's death occurred on or after January 1, 1998. The deceased worker must have credits for at least one-third of the years in the contributory period for a minimum of three years up to a maximum of 10 years. Remarriage will not affect entitlement.

QPP-Same as CPP, except no age requirement.
Divorced widow or widower-Same as widow or widower if marriage lasted at least 10 years. Divorced widow or widower-

OAS-No provision.

CPP-No provision.
However, see note under divorced spouse.

QPP-No provision.
However, see note under divorced spouse.
Surviving children- Same as children of retired or disabled worker. Surviving children-

OAS-No provision.

CPP-Same as children of disabled worker. Same contributory requirements as for widow/widower.

QPP-Same as children of disabled worker. Same contributory requirements as for widow/widower.


Lump-sum death benefit-A one-time payment not to exceed $255 payable on the death of an insured worker. Lump-sum death benefit-

OAS-No provision.

CPP-Same minimum contributory requirements as for other survivor benefits. One-time payment equal to six times the monthly retirement pension of the deceased worker to a maximum of CDN $2,500.

QPP-Same minimum contributory requirements as for other survivor benefits. One-time payment of CDN $2,500.










IV.A. How benefits can be paid If you have Social Security credits in both the United States and Canada, you may be eligible for benefits from one or both countries. If you meet all the basic requirements under one country’s system, you will get a regular benefit from that country. If you do not meet the basic requirements, the agreement may help you qualify for a benefit as explained below.





IV.A.1. Benefits from the U.S If you do not have enough work credits under the U.S. system to qualify for regular benefits, you may be able to qualify for a partial benefit from the United States based on both U.S. and Canadian (CPP/ QPP) credits. However, to be eligible to have your Canadian credits counted, you must have earned at least six credits (generally one and one-half years of work) under the U.S. system. If you already have enough credits under the U.S. system to qualify for a benefit, the United States cannot count your Canadian credits.






IV.A.2. Benefits from Canada Canada provides retirement, survivors and disability benefits through two separate programs.

  1. Old-Age Security (OAS) Program

    To get OAS benefits, you must be 65 or older and must have been a resident of Canada for at least 10 years after age 18 (or 20 years after age 18 to have benefits paid outside Canada).

    Under the agreement, Canada will consider your U.S. Social Security credits earned after 1951 and after age 18, along with periods of residence in Canada after 1951 and after age 18, to meet the OAS residence requirements. However, to be eligible to have your U.S. credits counted, you must have resided in Canada for at least one year after 1951 and after age 18.

  2. Canada Pension Plan and Quebec Pension Plan

    The Canada Pension Plan (CPP) and the Quebec Pension Plan (QPP) pay retirement, survivors and disability pensions based on your covered work performed on or after January 1, 1966 (when CPP and QPP started), and the amount of your earnings. The CPP operates throughout Canada, except in the Province of Quebec. Both plans require a minimum amount of work credits to qualify for benefits. People who have contributed to both CPP and QPP receive one benefit based on their total contributions to both plans.

Under the agreement, U.S. Social Security credits completed after 1965 may be considered along with CPP or QPP work credits, if necessary, to meet the minimum requirements for CPP or QPP disability or survivors benefits. However, to be eligible to have your U.S. credits counted, you must have earned at least one year of credit under the CPP or QPP. It is not necessary to consider U.S. Social Security credits in determining eligibility for CPP or QPP retirement benefits since anyone who has made at least one contribution to either plan can qualify for a retirement benefit at 65 or a reduced retirement benefit as early as 60.






IV.B. How credits get counted You do not have to do anything to have your credits in one country counted by the other country. If we need to count your credits under the Canadian system to help you qualify for a U.S. benefit, we will get a copy of your Canadian record directly from Canada when you apply for benefits. If Canadian officials need to count your U.S. credits to help you qualify for a Canadian benefit, they will get a copy of your U.S. record directly from the Social Security Administration when you apply for the Canadian benefit.

Although each country may count your credits in the other country, your credits are not actually transferred from one country to the other. They remain on your record in the country where you earned them and can also be used to qualify for benefits there.





IV.C. Computation of U.S. benefit Under the agreement When a U.S. benefit becomes payable as a result of counting both U.S. and Canadian Social Security credits, an initial benefit is determined based on your U.S. earnings as if your entire career had been completed under the U.S. system. This initial benefit is then reduced to reflect the fact that Canadian credits helped to make the benefit payable. The amount of the reduction will depend on the number of U.S. credits: the more U.S. credits, the smaller the reduction; and the fewer U.S. credits, the larger the reduction.





Part V -- A CPP/QPP pension may affect your U.S. benefit If you qualify for Social Security benefits from the United States based only on U.S. credits and a CPP/QPP benefit from Canada, the amount of your U.S. benefit will be reduced. This is a result of a provision in U.S. law which can affect the way your benefit is figured if you also receive a pension based on work that was not covered by U.S. Social Security. Receipt of a Canadian Old-Age Security pension, which is based on residence in Canada, will not affect the way your benefit is figured. For more information, call our toll-free number, 1-800-772-1213, and ask for the publication, Windfall Elimination Provision (Publication No. 05-10045). If you are outside the United States, you may write to us at the address in Part VIII.



Part VI -- What you need to know about Medicare Medicare is the U.S. national health insurance system for people age 65 or older or who are disabled. Medicare has two parts: hospital insurance (also called "Part A" Medicare) and medical insurance (called "Part B" Medicare). You are eligible for free hospital insurance at age 65 if you have worked long enough under U.S. Social Security to qualify for a retirement benefit. People born in 1929 or later need 40 credits (about 10 years of covered work) to qualify for retirement benefits.

Although the agreement between the United States and Canada and the understanding between the United States and Quebec allows the Social Security Administration to count your CPP or QPP credits to help you qualify for U.S. retirement, disability or survivor benefits, the agreement does not cover Medicare benefits. As a result, we cannot count your credits in Canada or Quebec to establish entitlement to free Medicare hospital insurance.

For more information about Medicare, call our toll-free number, 1-800-772-1213, and ask for the publication, Medicare (Publication No. 05-10043) or visit Medicare’s website at www.medicare.gov.





Part VII --Claims for benefits If you live in the United States and wish to apply for U.S. or Canadian benefits:

  • Visit or write any U.S. Social Security office; or
  • Phone our toll-free number, 1-800-772-1213, 7 a.m. to 7 p.m. any business day. People who are deaf or hard of hearing may call our toll-free TTY number, 1-800-325-0778.


You can apply for Canadian benefits (OAS, CPP or QPP) at any U.S. Social Security office by completing application form CDN-USA 1 (for OAS and CPP benefits) or QUE/USA-1 (for QPP benefits).

If you live in Canada and wish to apply for U.S. benefits:

  • Visit or write any U.S. Social Security office located along the U.S.-Canadian border; or
  • Contact any Canadian or Quebec Social Security office.
If you live in Canada and wish to apply for Canadian or Quebec benefits, contact any Canadian or Quebec Social Security office.

You can apply with one country and ask to have your application considered as a claim for benefits from the other country. In that case, your application will be sent to the other country. Each country will process the claim under its own laws––counting credits from the other country when appropriate––and notify you of its decision.

If you have not applied for benefits before, you may need to provide certain information and documents when you apply. These include the worker’s U.S. and Canadian Social Security numbers, proof of age for all claimants, evidence of the worker’s U.S. earnings in the past 24 months and information about the worker’s coverage under the Canadian system. You may wish to call the Social Security office before you go there to see if any other information is needed.





VII.A. Payment of benefits Each country pays its own benefits. U.S. payments are made by the U.S. Department of Treasury each month and cover benefits for the preceding month. Benefits under Canada’s OAS and CPP systems and Quebec’s QPP system are paid near the end of each month and represent payment for that month.





VII.B Absence from U.S. territory Normally, people who are not U.S. citizens may receive U.S. Social Security benefits while outside the U.S. only if they meet certain requirements. Under the agreement, however, you may receive benefits as long as you reside in Canada, regardless of your nationality. If you are not a U.S. or Canadian citizen and live in another country, you may not be able to receive benefits. The restrictions on U.S. benefits are explained in the publication, "Your Payments While You Are Outside The United States" (Publication #05-10137).





VII.C Appeals If you disagree with the decision made on your claim for benefits under the agreement, contact any U.S. or Canadian Social Security office. The people there can tell you what you need to do to appeal the decision.

The appropriate Canadian Social Security authorities (i.e., OAS, CPP or QPP) will review your appeal if it affects your rights under the Canadian system, while U.S. Social Security authorities will review your appeal if it affects your rights under the U.S. system. Since each country’s decisions are made independently of the other, a decision by one country on a particular issue may not always conform with the decision made by the other country on the same issue.





Part VIII -- For more information To file a claim for U.S. or Canadian benefits under the agreement, follow the instructions in Part VII.

To find out more about U.S. Social Security benefits or for information about a claim for benefits, contact any U.S. Social Security office. If you live outside the United States, write to:

Social Security Administration
OIO—Totalization
P.O. Box 17049
Baltimore, Maryland 21235-7049
U.S.A.


For more information about the Old-Age Security program or the Canada Pension Plan, contact any office of the Department of Human Resources Development, Income Security Programs, or write to:

International Operations Directorate
Income Security Programs Branch
Department of Human Resources Development
Ottawa, Ontario
CANADA K1A OL4


For more information on the Quebec Pension Plan, contact any office of the Régie des rentes de Québec or write to:

Régie des rentes de Québec
Case Postale 5200
Québec City, Québec
CANADA G1K 7S9


If you do not wish to file a claim for benefits, but would like more information about the agreement, write to:

Social Security Administration
Office of International Programs
P.O. Box 17741
Baltimore, Maryland 21235-7741
U.S.A.




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How to declare as tax non-resident of Canada - Dennis Lee, David MacLean, Wolf Bergelt, Judge Teskey

Hi, David:
> I have been enjoying your messages regarding taxes and even immigration. Great source of information. I am also touched by your account of experience with your children - - there is similar reflection. Importance is to spend more valuable quality time with the kids.
>
> What is the procedure to declare oneself as non-resident (in terms of taxation) of Canada ?
> Thanks
> ____________________________________________
david ingram replies:

There is really no such thing as "declaring" oneself a non-resident of Canada. You 'can' fill in a NR73 and ask for a ruling but these only give the CRA a list of who to look at after.

You can call a toad a frog all day long and it is still a toad.

You are either a non-resident in fact or you are a taxable resident of Canada because of your lifestyle or because you are not a 'real' resident of the other country that you are calling home.

It is very easy to become a non-taxed resident of Canada if your other country is a tax treaty country like the United States or Greece or Spain or Indonesia.

It is difficult in a non-tax treaty country like Saudi Arabia or the Grand Cayman Islands and also difficult in the UAE (United Arab Emirates) countries like Dubai which have a treaty but which treaty is almost useless for Canadian citizens but does wonders for a UAE national.

Read the following tax cases and pay attention to the Dennis Lee, Wolf Bergelt and David MacLean Cases. David MacLean even had a letter from the CRA stating that he was a non-resident so you can see that they are not worth the paper they are written on. Judge Teskey's list is 'right on'!

---------------------------------------------------------

My_question_is: Canadian-specific
Subject: Thinking of moving to Dubai to work for government from Canada
Expert: [email protected]
Date: Saturday March 31, 2007
Time: 11:25 AM -0500

QUESTION:

Hi,

I have been bantering back and forth with a possible offer to work for the government of Dubai.. if I do accept the offer and go, I want to keep my condo and my car here in Canada... I will establish a residence there as well.. my question is how much tax will I have to pay out of my income from over there.. I do not wish to sell everything and put it in storage... the car maybe, but it is a lease and I don't currently own it.. but Dubai is ready to take care of my obligations here, so I say keep it.

Thanks for your time

_______________________________________________________________
david ingram replies:

If you keep a car and home here and return for visits, you will be taxable at full rates on whatever you earn in Dubai.

read the following:

So what are the rules?

Well, to leave Canada for tax purposes, you must give up clubs, bank accounts, memberships, driving licences, provincial health care plans, family allowance payments (if you are a returning resident, you can continue to get Family Allowance out of the country), your car, and furniture. You can keep a house here as an investment and rent it out, but it must be rented on lease terms of a year or more. And you MUST have an agent sign an NR6 for you (see example). This NR6 has the Canadian Resident AGENT ** guarantee the Canadian Government that if YOU do not pay your tax to Canada, the AGENT WILL. Even after fulfilling the foregoing, the Canadian government can still tax you or "try" to tax you on your income out of the country. If you are being paid by a Canadian Company, they can quite often succeed.

Even though you can collect family allowance out of the country, don't! One client's wife found out that she could get family allowance out of the country if she said they were coming back to Canada. She got some $3,000 of family allowance and cost the family some $80,000 in income tax when they came back to Canada from Brazil. I will never forget the husband's expression when he found out why he had been reassessed and I will never forget his wife's explanation. She said he was a skinflint and never gave her any money. The total episode cost them their house.

** The "agent" referred to above can be a friend, relative, or a business such as ours. We charge a minimum of $40.00 per month to be an "AGENT" for an NR-6 filing. This $480 per year is "in addition" to any other fees but "well worth it" of course. It stops your mother, father, brother, next door neighbour or ex-best-friend from being plagued by paperwork they do not understand.

OUT OF CANADA AND RESIDENT - IN CANADA AND NON-RESIDENT

It is possible to be physically "in Canada" and be treated as a Non-Resident and it is possible to be out of the country for seven years, or never have even lived in Canada, but wanted to, and be taxed as a Canadian resident as the following three cases show. In case you missed it, the reason for the different rulings is the "INTENT" of the parties involved. Wolf Bergelt intended to leave Canada. David MacLean was only working out of the country. He still maintained a residence and could not ever become a resident of Saudi Arabia anyway. Dennis Lee "wanted" to live in Canada.

In 1986, Wolf Bergelt won non-resident status before Judge Collier of the Federal Court, even though he was only out of the country for four months and his family stayed behind to sell his house. He had given up his memberships, kept only one bank account and rented an apartment in California until his house in Canada was sold. Four months after his move, his company advised him that he was being transferred back to Canada. Judge Collier said his move was a permanent (although short) move and he was a non-resident for tax purposes for those four months.

In 1985, David MacLean lost his claim for non-residence status even though he was gone for seven years. He kept a house and investments in Canada and returned a couple of times a year to visit parents. He had even been to the Tax Office and received a letter on January 29, 1980 stating that his Canadian Employer could waive tax deductions because he was a non-resident. However, he did not advise his banks, etc. that he was a non-resident so that they would withhold tax, he did not rent his house out on a long term lease and he did not do any of the things that makes a person a "NON-RESIDENT". Judge Brule of the Tax court of Canada said that he thought Mr. MacLean had stumbled on the non-resident status by chance rather than by design. In other words, to become a non-resident of Canada, you must become a bone fide resident of another country. As a rule, only a Muslim born in Saudi Arabia to Saudi Arabian parents can become a Saudi Arabian citizen. The best that David MacLean can hope for is that he has a Saudi Arabian temporary work permit.

In other words, when a person leaves a place, they usually leave and establish a new identity where they are because the "new place" is where they live now. Trying to "look" like a non-resident is not the same as "BEING" a non-resident - think about it.

In 1989, Denis Lee won part but lost most of his claim for non-resident status. He was a British Subject who worked on offshore oil rigs. He maintained a room at his parents house in England and held a mortgage on his ex-wife's house in England. For the years 1981, 82 and 83 he did not pay income tax anywhere. in 1981 he married a Canadian and she bought a house in Canada in June of 1981. On September 13, 1981, he guaranteed her mortgage at the bank and swore an affidavit that he was "not" a non-resident of Canada. [As I have said in the capital gains section of this book, bank documents will get you every time.] During this time he had a Royal Bank account in Canada and the Caribbean but no Canadian driver's licences or club memberships, etc.

Judge Teskey said:

"The question of residency is one of fact and depends on the specific facts of each case. The following is a list of some of the indicia relevant in determining whether an individual is resident in Canada for Canadian income tax purposes. It should be noted that no one of any group of two or three items will in themselves establish that the individual is resident in Canada. However, a number of the following factors considered together could establish that the individual is a resident of Canada for Canadian income tax purposes":

- past and present habits of life;
*
- regularity and length of visits in the jurisdiction asserting residence;
*
- ties within the jurisdiction;
*
- ties elsewhere;
*
- permanence or otherwise of purposes of stay;
*
- ownership of a dwelling in Canada or rental of a dwelling on a long-term basis (for example, a lease of one or more years);
*
- residence of spouse, children and other dependent family members in a dwelling maintained by the individual in Canada;
*
- memberships with Canadian churches, or synagogues, recreational and social clubs, unions and professional organizations (left out mosques);
*
- registration and maintenance of automobiles, boats and airplanes in Canada;
*
- holding credit cards issued by Canadian financial institutions and other commercial entities including stores, car rental agencies, etc.;
*
- local newspaper subscriptions sent to a Canadian address;
*
- rental of Canadian safety deposit box or post office box;
*
- subscriptions for life or general insurance including health insurance through a Canadian insurance company;
*
- mailing address in Canada;
*
- telephone listing in Canada;
*
- stationery including business cards showing a Canadian address;
*
- magazine and other periodical subscriptions sent to a Canadian address;
*
- Canadian bank accounts other than a non-resident account;
*
- active securities accounts with Canadian brokers;
*
- Canadian drivers licence;
*
- membership in a Canadian pension plan;
*
- holding directorships of Canadian corporations;
*
- membership in Canadian partnerships;
*
- frequent visits to Canada for social or business purposes;
*
- burial plot in Canada;
*
- legal documentation indicating Canadian residence;
*
- filing a Canadian income tax return as a Canadian resident;
*
- ownership of a Canadian vacation property;
*
- active involvement with business activities in Canada;
*
- employment in Canada;
*
- maintenance or storage in Canada of personal belongings including clothing, furniture, family pets, etc.;
*
- obtaining landed immigrant status or appropriate work permits in Canada;
*
- severing substantially all ties with former country of residence.
*

"The Appellant claims that he did not want to be a resident of Canada during the years in question. Intention or free choice is an essential element in domicile, but is entirely absent in residence."

Even though Dennis Lee was denied residency by immigration until 1985 (his passport was stamped and limited the number of days he could stay in the country) and he did not purchase a car until 1984, or get a drivers licence until 1985, Judge Teskey ruled that he was a non-resident until September 13, 1981 (the day he guaranteed the mortgage and signed the bank guarantee) and a resident thereafter.

My point is made. Residency for "TAX PURPOSES" has nothing to do with legal presence in the country claiming the tax. It is a question of fact. My thanks to Judge Teskey for an excellent list. The italics are mine and refer to the items which I usually see people trying to "hold on to" after they leave and are trying to become non-residents. No single item will make you a resident, but there is a point where the preponderance of "numbers" leap out and say, "He / She is a resident of Canada, no matter what he / she says."

The case above is not unusual in any way. It is a fairly typical situation in my office.

In 1990, John Hale was taxed as a resident on $25,000 of directors fees he had received from his Canadian Employer and on $125,000 he received for exercising a share stock option given to him when he had been a resident of Canada (the option, not the stock). Judge Rouleau of the Federal Court ruled that section 15(1) of the Great Britain / Canada Tax Convention did not protect the $125,000 as it was not "salaries, wages, and other remuneration". It was, however a benefit received by virtue of employment within the meaning of section 7(1)(b) of the act.

Even a car you do not own can make you a resident as the next sailor found out.

In 1988, FrederickReed was claimed by the Canadian Government as one of their own. He lived on board ship and shared an apartment with a friend in Bermuda but only occasionally. He also stayed with his parents in Canada when visiting his employer in Halifax. Judge Bonner of the Tax court ruled that he could not claim his place of employ or the ship as his residence and just because he did not have a fixed abode, did not make him a non-resident. He was also the beneficial owner of a car in Canada which even though of minor consequence, served to add to his Canadian Residency. He had in fact borrowed money from a credit union to buy the car, even though it was registered in his father's name. He had maintained his Canadian Driver's licence as well.

An interesting case in June, 1989 involved Deborah and James Provias who left Canada in October of 1984. They had sold a multiple unit building to James' father on September 21, 1984 but the statement of adjustments did not take place until December 1, 1984. They tried to write off rental losses and a terminal loss against other income as `departing Canadians'. Judge Christie of the Tax Court ruled that they had left before the sale and were not entitled to the terminal loss or another capital loss as these could only be applied against income earned in Canada from October 13, 1984 (the day they left) to November 30, 1984 (the day before the sale) and there was no income, only a rental loss.

But June, 1989 was a good month for Henry Hewitt. He had been a non-resident living in Libya for four years and received some back pay after returning to Canada. DNR tried to tax him on the money but Judge Mogan of the Tax Court came to the rescue. He ruled that although Canadians were usually taxable on money when received, that assumed that the money itself was taxable in Canada, which was not true in this case.

In 1989, James Ferguson lost his claim for non-residency status but from the information, it didn't stand a chance anyway. He had been in Saudi Arabia on a series of one year contracts for four years. His wife remained employed in Canada, and he kept his house, car, driver's licence, union membership, and master plumber's licence. Judge Sarchuk ruled that he had always intended to return to Canada and was a resident.

A similar situation involved John and Johnnie M. Eubanks in the United States. He was working on an offshore oil rig in Nigeria with a Nigerian work permit and attempted to claim non-resident status for the purposes of exempting the foreign earned income exclusion. His wife was in the United States at all times and because he worked 28 days on and 28 days off, he returned to the U.S. for his rest periods using 4 days for travel and 24 days for rest with his family. He did not spend any 330 day period (out of a year) in Nigeria and only had a residency permit for the purposes of working in Nigeria. Judge Scott ruled he was a resident of the U.S. and taxed him some $20,000 with another $6,000 penalties and interest.

The Tax departments in Canada and the U.S. issue Interpretation Bulletins and Information Circulars and Guidance Pamphlets. These documents sometimes get people in trouble because the individual reads the good part and doesn't pay any attention to the exceptions. The following case ran contrary to a Guidance Pamphlet issued by the IRS.

On and Off-shore Oil rigs were involved with William and Margaret Mount and Jesse and Mary Wells. William and Jesse worked in the United Arab Emirates. However, they kept their homes and families in Louisiana and kept their driver's licences in Louisiana and voted in Louisiana. No evidence was shown that they had tried to settle in The United Arab Emirates. Judge Jacobs turned down claimed exclusions of approximately $75,000 each.

There isn't any question about what oil rig people talk about on oil rigs. It has to be "how to beat the tax man". Unfortunately, they all seem to think it is easy. Another such story follows.

In 1989, Clarence Ritchie found out that bona fide residence means just what it says. You cannot be a non-resident of the U.S. for tax purposes if you are not a bona fide resident of another country. He was working on the Mobil Oil Pipeline in Saudi Arabia and although when he left he was married with a couple of kids, by the time he returned permanently, he was a happily divorced man. Judge Scott ruled that though he did not have an abode in the United States, he had not established one in Saudi Arabia and therefore was not entitled to the foreign earned income exclusion which requires you to be away for 330 days out of 365. He had worked a 42 days on, 21 days off schedule and usually returned to the U.S. for his days off although he did spend time in Tunisia, England, Italy and Greece.

On a final note, as explained on page 143 of the "PINK" 17th edition of my ULTIMATE TAX BOOK, it is possible to have three countries after you for tax. If you are thinking of taking a job because a recruiter told you the money is tax free, think twice and check three times with competent individuals about what the rules "really are". No government likes giving up the right to tax its citizens.

DEBT SECURITIES - BANK ACCOUNTS

Non-residents of Canada with investments in Canada are subject to a 25% non-resident withholding tax on any money paid to them while they are out of the Canada. Therefore, if they have $10,000 in the Bank of Montreal and they live in Argentina, The Bank of Montreal must withhold 25 cents out of every dollar of interest paid to the account. Most tax treaty countries such as Great Britain, Germany, the United States, and Australia have a reciprocal agreement with Canada that limits the withholding to 15%.
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gift of condo to son

My question is: Canadian-specific

QUESTION: We would like to give outright one of our two properties to our son. We purchased a new, small condo in Toronto for him in 2000 as a residence while he went to school. He has been the sole occupant, we have paid all related expenses. The condo has appreciated approximately $100,000.00. Can we simply give him the condo without any money exchange and pay no capital gains tax?

___________________________________________________________
david ingram replies:

If you bought it for him and only put it in your name to protect it from his being able to sell it, etc., then you should be able to transfer it now with no tax consequences. This also assumes that as his finances improved, he started treating it as his and started paying the expenses of the unit.

If, on the other hand, you have reported it as a rental unit and deducted rental losses on your tax return, you will owe capital gains tax on its disposal to your son or a stranger..