Hong Kong resident with brother living in house in Canada.
QUESTION: My Brother is a non-residant Canadian Citizen currently living in HongKong, He lived in HongKong over 10 years. Now he want to buy a house in Toronto and let me live in it for several years, I don't pay rent to him. After a few years later, when he came back to Canada, I give back the house to him. What is the best way to deal with this situation for saving tax purpuse? If he transfer money to my account in Canada and buy the house with my name on the title, I can sign a letter as his trustee in a lawyer office. I hold the house for him. will he change his non-residential status? Do I need to pay tax when I fill tax form next year? Do we need to pay tax in the future when I return the house to him? will he pay tax when he sell the house in the future? thanks!
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david ingram replies:
If your brother loans you the money to buy a house and you buy a house and live in the house and maintain the house and it is your house, then any profit is tax free.
If your borother gives you the money to buy the house and you are going to give the house to him when he returns to Canda then you are just the trustee and it is his house an dthat means that the CRA might try and tax him as they did David MacLean who was in Saudi Arabia for seven years
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 your brother's case, he can be a resident of Hong Kong and likely is. That means that any uincrease in the value of the house (if you are holding it for him as you suggest) is subject to Canadian capital gaisn tax when he moves ito it or it is sold while he is still in Hong Kong. �
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david ingram replies:
If your brother loans you the money to buy a house and you buy a house and live in the house and maintain the house and it is your house, then any profit is tax free.
If your borother gives you the money to buy the house and you are going to give the house to him when he returns to Canda then you are just the trustee and it is his house an dthat means that the CRA might try and tax him as they did David MacLean who was in Saudi Arabia for seven years
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 your brother's case, he can be a resident of Hong Kong and likely is. That means that any uincrease in the value of the house (if you are holding it for him as you suggest) is subject to Canadian capital gaisn tax when he moves ito it or it is sold while he is still in Hong Kong. �
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