Hello,
I just found your website and hoped you could answer a couple of questions
for us. We are both Canadian citizens working and residing in Seattle
under TN visas. We moved to the US in 10/97. We paid taxes on Canadian
income through 10/97 to Revenue Canada and on US Income from 10-12/97
using a 1040-NR since Revenue Canada claimed us as residents through
12/97. Since then we have used 1040 to pay taxes in the US, as US
resident aliens. We have no ties to Canada that could make us tax
residents there (eg no property, bank accts, RRSPs etc).
We are now planning to move back to Canada in 2004. Here are some of the
questions we've been thinking about:
1) are there tax implications for selling our house in Seattle? I have
seen reference to additional tax for non-citizens and/or non-residents,
but for tax purposes we are considered residents. Also, what are the
import implications for bringing the proceeds from the sale of the house
back into Canada?
2) we have invested in a 401K plan here in the US. Is there a way to roll
that over into a similar mutual fund or RRSP in Canada and avoid paying
huge penalties for withdrawing the funds?
3) what are the income tax implications for the time of our departure from
the US? We were planning to move around the end of June and it seems that
the 183 day rule is important. Should we time our move for before the 183
days? When it's time to file for 2004, would we file a 1040 for the
income earned in the US up to the time we left, and then file in Canada on
the rest?
4) if we happen to buy property in Canada before we officially move back
there (eg while still earning income in the US), will we compromise our
position with respect to tax residency?
Thanks very much for your help,
-- AXXXXXXXX XXXXXXXXX
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david ingram replies:
1. You and your husband can sell the Seattle house for up to $500,000 US
profit with no tax consequences.
2. You should be able to transfer the funds under the treaty. Canada's RRSP
booklet has a specific line for it. However, the problem is getting the US
holder of the plan to accept it as well. You might spend months and give up
in frustration. My personal advice is to leave the money in the US until
retirement.
3. This is pretty irrelevant. Whatever happens, you will have earned income
exemptions and foreign tax credits to avoid double taxation. My personal
preference would be that you were in the US more than the 183 days.
4. The answer is that you will not compromise your position. Article IV of
the US Canada tax treaty is going to leave you a resident of the US - Go to
www.centa.com and click on US / Canada taxation to read Article IV. If the
property in Canada is rented out on a non-arms length basis, there is no
problem. If the Canadian property is empty and waiting for you to come and
live in it, there should be no problem if you stay in the USA with US
driver's licences, US car licences, US jobs, etc. up to the day you leave.
Hope this helps,
This is, of course, what we do for a living.
david ingram - [email protected] <mailto:[email protected]>
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 913-9133 - (604) 913-9123 www.centa.com <http://www.centa.com>
Cell is (604) 657-8451 (10 AM to 10 PM seven days a week)
US/Canada Real Estate Taxation Specialists
US / CANADA / MEXICO
Working Visa and Income Tax Specialists
Disclaimer: This question has been answered without detailed information or
consultation and is to be regarded only as general comment. Nothing in
this message is or should be construed as advice in any particular
circumstances. No contract exists between the reader and the author and any
and all non-contractual duties are expressly denied. All readers should
obtain formal advice from a competent and appropriately qualified legal
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