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Can US daughters co-sign Canadian Mortgage with Father

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This question came in from "ASK AN EXPERT" at go in here =
for your answers to real estate, financing and income tax.  If you only =
have a tax question or want to peruse the archives click on:
My question is: Canadian-specific
QUESTION: I have two adult married children living for a couple of years
in the U.S. while nursing For income tax purposes they are not doing any
busines here in Canada so as not to have to pay the Candian tax. I have
the opportunity to purchase a rental in B.C. that may be a good =
investment that the three of us would hope to profit from largely from a =
future capital gain in value. I may be able to purchase the unit with =
nothing down by taking over the mortgage owing. However to do so I would =
need to have my daughters co-sign the mortgage. The rent will cover =
virtually all of the expenses.
Would co-signing the loan be a problem for them, causing them to have to
pay Canadian income tax on their U.S. earnings? If I sold the house a =
few years from now and gave them each 1/3 of the proceeds after my taxes =
would this cause a problem for any of us from Canada Revenue?=20
Thanks for your help.
K D=20
From: David Ingram at the CEN-TA Group <[email protected]>
Sent: Monday, June 17, 2002 2:10 PM
Subject: Can US daughters co-sign Canadian Mortgage with Father
 Under Article IV of the US / Canada Income Tax Treaty, they are not
 taxable in Canada on their US earnings if they are in the USA for an =
entire year and in most cases, after they have been there for more than =
six months.
Thus, if they go south on June 15th of 2000 and come back on Oct 15, =
2003, they are not taxable in Canada on their US income between those =
two dates.
(If they were in Saudi Arabia, this answer would be different.)
If you want your daughters to co-sign a 100% mortgage with you, it will =
not make them taxable in Canada on their US earnings.
If the property is a rental and you intend to own it equally (I assume =
so since you want to split it when sold), then they have to file a =
 section 216(4) tax return each year to report the rentals to Canada =
even if there is a loss.
They also need an agent, who could be you.  If so, you file form NR6 =
each year for each of your children.  This form must be filed BEFORE you =
receive the first rent cheque and renewed by Dec 31st of each current =
year for the next year.
i.e. - if you were going to buy it now and rent it in August, the first
two NR6 forms have to filed by July 31st and then renewed in December 0f =
2002 for the 2003 year.
Don't do it without talking to someone who understands the system.
You can find more details on this US / Canada taxation and sample cases
David Ingram
(604) 913-9133
 [email protected]
Sent: Monday, June 17, 2002 10:45 PM
Subject: Re: Can US daughters co-sign Canadian Mortgage with Father
Thank you very much for such a quick reply.
k d
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