My husband and I are Canadian citizens. We reside in
L.A. My husband is down here working on an L1B visa -
specialized worker. We have received no guidance from
his employer regarding tax implications. My questions
are:
1. We would like to purchase investment real estate in
Canada - where would we go for financing i.e. Cdn bank
or American bank
2. What are the tax implications? Does this affect our
American taxes? Does this "connect" us back to Canada
and make us liable for Canadian taxes.
We have been here for 4 years as of June 14, 2003. We
are waiting to see if his employer will get green
cards for us to allow us to stay longer. We have been
trying for 6 months to get these questions answered
and would be truly grateful if you can give us some
"guidance"
Thank you
JXXXXXXX
__________________________________
david ingram replies:
1. You can purchase investment real estate in Canada and should likely
finance it in Canada. It is unlikely but not impossible to get your
American Bank to deal with it but will be much, much easier with a Canadian
Bank.
2. Taxes are simple but you are setting yourself up for three tax
regimes. Do not worry, it is do-able.
Assuming it is a rental piece of Canadian Investment real estate, you will:
a buy the property - if it is in BC, you might consider using our CEN-TA
REALTY office services or one of our associated realtors.
b Get a property manager - as above
c Get a Canadian "tax" agent to represent you. that could be us, your
mother, your husband's father or brother, the real estate agent that looks
after the property or just about anyone. - The agent takes on your tax
responsibility though, so "just about anyone: has to be picked with care.
The tax agent and yourself sign form called an NR-6 which you can find and
read and experiment with at:
http://www.ccra-adrc.gc.ca/E/pbg/tf/nr6/nr6-00e.pdf
d After it has been rented until December 31st, you will file a Canadian
income tax return (or two if in joint tenancy) under Section 216(4) of the
Canadian Income Tax Act. A copy of that guide can be found at:
http://www.ccra-adrc.gc.ca/E/pub/tg/t4144/t4144-02e.pdf
e You or we (because that is what we do) will then convert the figures to
US funds and put them on Schedule E of your US 1040 return. If you have
paid tax to Canada on the rental, we would claim it as a tax credit on your
1040 by using US form 1116.
f Ditto the California 540. note that sometimes it is necessary (not
often) to change the depreciation figures for California and the foreign tax
credit is either quite different or non-existent.
Last, but not least, the Canadian Property does connect you back to Canada
for income tax purposes but will have no effect under Article IV of the US /
Canada Income Tax treaty unless it is a furnished home and you leave it open
and you and the kids start staying in it most of the time.
Read Article IV of the treaty at www.centa.com click on [US / Canada
Taxation]. The treaty is buried in there but you AND your husband should
read that whole section anyway.
You should also read the section on [Entering the US], also at
www.centa.com. It will explain the different visas to you. Push that
employer for green card status or you will "HAVE TO RETURN" to Canada when
the L1B visa runs out. If they are not eagerly sponsoring you, they may be
using it as an excuse to end his employment and stop their own long-term
commitments to him. Many US employers are using the Immigration rules to
limit their liability to employees and that is likely good business in one
sense but leaves them having to retrain new people and leaves disgruntled
workers as people realize what is happening.
Hope this helps. In any case, some one like us who does both countries and
the state should be doing your returns, particularly as you say you have not
been able to get answers for six months.
David Ingram of the CEN-TA REALTY Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 980-0321 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
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
practitioner or tax specialist in connection with personal or business
affairs such as at www.centa.com. If you forward this message, this
disclaimer must be included."
Be ALERT, the world needs more "lerts"
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