Snowbird purchasing real estate in Arizona
QUESTION:
My husband & I would like to take advantage of the current exchange rate as well as the deflating housing market in Arizona. We are concerned about being taxed on our 'world income' which is a Canadian gov't pension and RRSPs as well as other Canadian real estate holdings i.e. two Canadian investment properties and one cottage. We are concerned about what happens to our estate when one or both of us dies. You probably have answered this question a million times before but I couldn't pull up information from you site. It may be because I just registered today. Looking forward to your response. -----------------------------------------------------------
david ingram replies:
assuming you are buying a vacation p[roperty and not an investment property, Canada will treat it the same as if it was at the Lake of the Woods in Ontario, Lake Okanagan in BC or Lake LaBarge in the Yukon.
When sold, Canada, Arizona and The US federal government will all want capital gains tax if it hasd gone up in value. Canada will give you credit for the tax paid to the US and Arizona.
If one of you dies with a total world wide estate of more than $2,000,000 in 2007 or 2008 or $3,500,000 in 2009 (the amounts have not been set for 2010 and beyond) the unit would be subject to US estate tax on a pro-rata basis. However, Caanada would allow a foreign tax credit against any capital gains tax incurred by the deemed sale on death.
If you are in the US for less than 120 days a year, there is no US tax filing liability. If you are there for 140 days a year for two years in a row or more than 120 days a year for three years in a row, you trigger the necessity to file a US 1040NR tax return each under the substantial presence test.
Go to www.centa.com and read the April, 1994 newsletter in the top left hand box for an explanation of how and why.
If you are intending to rent the unit the rules are different and this older Q & A will likley help you. �
My husband & I would like to take advantage of the current exchange rate as well as the deflating housing market in Arizona. We are concerned about being taxed on our 'world income' which is a Canadian gov't pension and RRSPs as well as other Canadian real estate holdings i.e. two Canadian investment properties and one cottage. We are concerned about what happens to our estate when one or both of us dies. You probably have answered this question a million times before but I couldn't pull up information from you site. It may be because I just registered today. Looking forward to your response. -----------------------------------------------------------
david ingram replies:
assuming you are buying a vacation p[roperty and not an investment property, Canada will treat it the same as if it was at the Lake of the Woods in Ontario, Lake Okanagan in BC or Lake LaBarge in the Yukon.
When sold, Canada, Arizona and The US federal government will all want capital gains tax if it hasd gone up in value. Canada will give you credit for the tax paid to the US and Arizona.
If one of you dies with a total world wide estate of more than $2,000,000 in 2007 or 2008 or $3,500,000 in 2009 (the amounts have not been set for 2010 and beyond) the unit would be subject to US estate tax on a pro-rata basis. However, Caanada would allow a foreign tax credit against any capital gains tax incurred by the deemed sale on death.
If you are in the US for less than 120 days a year, there is no US tax filing liability. If you are there for 140 days a year for two years in a row or more than 120 days a year for three years in a row, you trigger the necessity to file a US 1040NR tax return each under the substantial presence test.
Go to www.centa.com and read the April, 1994 newsletter in the top left hand box for an explanation of how and why.
If you are intending to rent the unit the rules are different and this older Q & A will likley help you. �
QUESTION: Hello David,
I'm living in Vancouver, finally paid off the student debt but don't see myself getting into
the expensive Vancouver market. I do however like to ski and was thinking of buying an
inexpensive trailer (25k Cdn) in Maple Falls Washington.
However I'm not sure what other expensives I should expect given that it's in the US.
I'm not trying to make this an investment with a high return, but I would like to do some
handy work to it to increase the value. If I add about 10k worth of value, how would that
affect my taxes in the long term?
Thanks for the advice.
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david ingram replies:
One of my favourite weekends ever was in 1973 at the Chandelier (think it has a
different name now) when marooned at SnowLine because of the gas shortage when
one could only buy gas on odd days if your licence plate ended with an odd number
and even days when it was an even number.
Strangely, it was that weekend 34 years ago that lets me answer you question now.
The cabin I was staying in was not a rental but was built by the fellow who owned it.
When he was building it, buddies would come down and help him and one weekend, the INS
raided the spot and deported a bunch of his friends for working in the US .
"He" was fine building it because he owned it but no one else can hammer a nail, paint
a board, install a sink, or carry a shingle if they are not either an owner or a legal
US citizen or US resident with a green card.
If your buddy is working and living in the US with a TN, H1, O1, P1, L1 or any other
visa but a green card, they cam NOT help you either.
And, if you are intending to rent the trailer out 'EVER', 'you' can NOT hammer a nail,
sweep the front steps or clean the toilet.
Assuming you are buying this trailer on its own lot, when you go to sell, you will owe
the US income tax on the profit.
If it is your only pioece of real estate at that time, you will not owe Canada any tax
because you can claim it as your personal residence if you have not bought another place.
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However, I would far prefer that you stretched your resources to buy something in
Canada to live in and combine your present rent and the payments you would have to
make for the trailer to buy your home in Canada. If you can't afford a one bedroom,
buy a studio. Go down to Ikea onteh Lougheed highway and look at how much they can
put into a small space.
Interestingly, I read the other day that Ikea has now sold enough furniture in North
America that 10% of all children are conceived in an Ikea Bed. Now that is information
worth knowing.
Good luck
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