Vancouver BC Rental Property owned by Salem, Boston or other MA resident - Some cross border tax questions
Hello david,
I found the extract of your 'Border book' very interesting and informative.
I have a cross border tax returns to prepare and would like some advice from a tax expert.
Here is the scenario:
The client is a US resident living and working in MA, USA. He has a
rental property in Vancover, BC, Canada. A Canadian tax preparer prepared his
Canadian tax returns. The returns shows rental income of $13,100 BUT zero
Net Income ( income of 13,100 less expense of 13,100). The rental property was
put into service in April 2003.
Question:
1) Can he claim on his US tax returns all the taxes (Transfer, GST, PST) he paid to
acquire the rental property as a Foreign Tax Credit. OR are these taxes just figures to be used to adjust the cost basis of the property?
2) Do I have to prepare a US fed form Schedule E and 4562 using converted dollar figures
(canada to US) and also show ZERO net income.
Your response to these two questions will be highly appreciated.
david ingram replies
1. The three taxes mentioned are not income taxes. they form part of the adjusted cost base of the property.
2. Convert the Canadian Dollars to US dollars and put them in the relevant place on Schedule E and the 4562 depreciation form. For US purposes, this will create a tax deductible loss.
If there had been a profit, you would have claimed the foreign tax credit on form 1116.
I am including an answer I gave out a couple of days ago for your information.
=============
This question came from Ozzie Jurock's real estate website at www.jurock.com an excellent source of real estate information. For those wanting Canadian Mutual Fund advice, they should look at Fred Snyder's www.mutualfund101.com site.
My question is: Applicable to both US and Canada
QUESTION: My wife and I are American citizens who have recently
bought rental property in BC. We are planning to
immigrate to Canada in the next few years. After our
purchase we wanted to have a Canadian accountant help
us with NR6's and any other tax involvements down the
line. The accountant we worked with charges us $750 for
an initial consultation and filing an NR6 for each of us.
This seemed rather pricey for the minimal work involved
and the fact that we needed to also find our own
guarantor. I would like your opinion about going rates for
this work and perhaps some idea of your fees were we to
work with you in the future.
Thanks for you very helpful
Q&A column.
---------------------------------------------------------------------------
david ingram replies:
My typical charge for the same service would be $700 plus $49.00 GST which would put you in the same price range.
The NR-6 is available at:
http://www.ccra-adrc.gc.ca/E/pbg/tf/nr6/nr6-00e.pdf
Depending upon the property and for a further fee, we will also act as the tax agent and have associated rental agent services as well.
I prefer to say that I charge you for the time and advice and throw in the form. I generally charge $350.00 an hour for US / Canadian tax and Immigration consulting (both directions).
Although, the form is a minimal one, the advice and implementation is important and there are few of us doing it so it is a supply and demand phenomenon.
When it comes to the final returns, we will prepare the Canadian Returns AND US and state at the same time or the Canadian Returns and a dummy US return so that your US accountant can just plug in the figures and not spend hours figuring out where and how to put them in to his or her system.
If you go to www.centa.com and read the "US/Canada Tax" Section in the second box down on the right hand side, it will give you an idea of the ifferences between the two countries.
If you go to the Tax Guide section, you will find a chapter on renting in Canada.
And if you are serious about immigrating to Canada, be advised that processing times have increased dramatically in the last year.
The following was my answer a short time ago to someone immigrating from Great Britain.
david ingram replies:
You will first have to decide if you qualify to immigrate to Canada. You could come as an immigrant (easier under 50) or you could come as a business investor but I do not think that a bed and breakfast would qualify but someone will comment from the list this goes to (with your identification removed.)
To start with, you should go to http://www.cic.gc.ca/english/newcomer/guide/index.html and read the Canadian Government's site on immigrating to Canada
Make sure that you fill in the self-assessing questionnaire at http://www.cic.gc.ca/english/skilled/assess/index.html If you get 67 points on this self-assessment, , you will qualify if nothing else rears its head. The mark was 75 just a couple of months ago. If you get the 67, let me know and we can continue on from there.
As a new immigrant, you can set up an offshore trust to protect your assets from Canadian tax for five years. If you do this, you are only taxable on amounts earned in the trust that you take out to live on. This does not make sense to me though because if you are going to buy a house for a B & B a wife and two almost adult kids, it will take most of your money to buy one and you should pay cash for the best tax break. If you need money after for investment, borrow against the house and the mortgage interest will be deductible. Goto www.centa.com and read the Nov 2001 newsletter for more information on this.
Your house in Great Britain is taxable in Canada also but any increase in value will not be taxable if you leave Canada within ten years..
You should also go to www.centa.com and read the US/Canada taxation section. Although it might seem that it does not apply to you, 95% does and Article IV of the US/CANADA Income Tax Treaty is almost word for word with the UK/CANADA Income Tax Treaty. The only exception is that you do not have to file a US income Tax return but will continue to file an A4 GB return to report your rental in GB.
I found the extract of your 'Border book' very interesting and informative.
I have a cross border tax returns to prepare and would like some advice from a tax expert.
Here is the scenario:
The client is a US resident living and working in MA, USA. He has a
rental property in Vancover, BC, Canada. A Canadian tax preparer prepared his
Canadian tax returns. The returns shows rental income of $13,100 BUT zero
Net Income ( income of 13,100 less expense of 13,100). The rental property was
put into service in April 2003.
Question:
1) Can he claim on his US tax returns all the taxes (Transfer, GST, PST) he paid to
acquire the rental property as a Foreign Tax Credit. OR are these taxes just figures to be used to adjust the cost basis of the property?
2) Do I have to prepare a US fed form Schedule E and 4562 using converted dollar figures
(canada to US) and also show ZERO net income.
Your response to these two questions will be highly appreciated.
david ingram replies
1. The three taxes mentioned are not income taxes. they form part of the adjusted cost base of the property.
2. Convert the Canadian Dollars to US dollars and put them in the relevant place on Schedule E and the 4562 depreciation form. For US purposes, this will create a tax deductible loss.
If there had been a profit, you would have claimed the foreign tax credit on form 1116.
I am including an answer I gave out a couple of days ago for your information.
=============
This question came from Ozzie Jurock's real estate website at www.jurock.com an excellent source of real estate information. For those wanting Canadian Mutual Fund advice, they should look at Fred Snyder's www.mutualfund101.com site.
My question is: Applicable to both US and Canada
QUESTION: My wife and I are American citizens who have recently
bought rental property in BC. We are planning to
immigrate to Canada in the next few years. After our
purchase we wanted to have a Canadian accountant help
us with NR6's and any other tax involvements down the
line. The accountant we worked with charges us $750 for
an initial consultation and filing an NR6 for each of us.
This seemed rather pricey for the minimal work involved
and the fact that we needed to also find our own
guarantor. I would like your opinion about going rates for
this work and perhaps some idea of your fees were we to
work with you in the future.
Thanks for you very helpful
Q&A column.
---------------------------------------------------------------------------
david ingram replies:
My typical charge for the same service would be $700 plus $49.00 GST which would put you in the same price range.
The NR-6 is available at:
http://www.ccra-adrc.gc.ca/E/pbg/tf/nr6/nr6-00e.pdf
Depending upon the property and for a further fee, we will also act as the tax agent and have associated rental agent services as well.
I prefer to say that I charge you for the time and advice and throw in the form. I generally charge $350.00 an hour for US / Canadian tax and Immigration consulting (both directions).
Although, the form is a minimal one, the advice and implementation is important and there are few of us doing it so it is a supply and demand phenomenon.
When it comes to the final returns, we will prepare the Canadian Returns AND US and state at the same time or the Canadian Returns and a dummy US return so that your US accountant can just plug in the figures and not spend hours figuring out where and how to put them in to his or her system.
If you go to www.centa.com and read the "US/Canada Tax" Section in the second box down on the right hand side, it will give you an idea of the ifferences between the two countries.
If you go to the Tax Guide section, you will find a chapter on renting in Canada.
And if you are serious about immigrating to Canada, be advised that processing times have increased dramatically in the last year.
The following was my answer a short time ago to someone immigrating from Great Britain.
david ingram replies:
You will first have to decide if you qualify to immigrate to Canada. You could come as an immigrant (easier under 50) or you could come as a business investor but I do not think that a bed and breakfast would qualify but someone will comment from the list this goes to (with your identification removed.)
To start with, you should go to http://www.cic.gc.ca/english/newcomer/guide/index.html and read the Canadian Government's site on immigrating to Canada
Make sure that you fill in the self-assessing questionnaire at http://www.cic.gc.ca/english/skilled/assess/index.html If you get 67 points on this self-assessment, , you will qualify if nothing else rears its head. The mark was 75 just a couple of months ago. If you get the 67, let me know and we can continue on from there.
As a new immigrant, you can set up an offshore trust to protect your assets from Canadian tax for five years. If you do this, you are only taxable on amounts earned in the trust that you take out to live on. This does not make sense to me though because if you are going to buy a house for a B & B a wife and two almost adult kids, it will take most of your money to buy one and you should pay cash for the best tax break. If you need money after for investment, borrow against the house and the mortgage interest will be deductible. Goto www.centa.com and read the Nov 2001 newsletter for more information on this.
Your house in Great Britain is taxable in Canada also but any increase in value will not be taxable if you leave Canada within ten years..
You should also go to www.centa.com and read the US/Canada taxation section. Although it might seem that it does not apply to you, 95% does and Article IV of the US/CANADA Income Tax Treaty is almost word for word with the UK/CANADA Income Tax Treaty. The only exception is that you do not have to file a US income Tax return but will continue to file an A4 GB return to report your rental in GB.
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