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QUESTION:
We are Canadian citizens living in the US and are now considered US residents. Due to frequent visits to visit my family in Ontario, we are considering buying a Condo in Ontario to have a place to stay; prior to leaving Canada for the US, we had sold our house.
What would this ownership and the resulting mortgage entail from a US taxation standpoint?
Thank you.
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david ingram replies:
One of the major factors in determining whether a Canadian has escaped or is no longer subject to Canadian taxation on their world income is whether the Canadian has a residence available to them in Canada. Frequency and duration of visits is another criteria and you are walking into both of them.
Canada will have every right to try and tax your family as factual residents of Canada if you buy your condo.
This will require you to file a Canadian tax return each year and report your world wide income to Canada.
However, you would then exempt all the US income on line 256 of the tax return under Article IV of the US / Canada tax convention because you are genuinely living in the USA. This assumes that you are spending less then three or four months in Canada.
I know that the general rule is 183 days which implies six months but people in your position get very comfortable and before you know it, you have a ROGERS and BLOCKBUSTER Video card, you signed up for Canadian medical again, you have a dozen Canadian things going on and you are back living in Canada for tax purposes.
Go to www.centa.com and read the US/Canada Taxation section until you find the DENNIS LEE CASE ruled on by Judge Teskey and pay ATTENTION to Judge Teskey's list of what "NOT TO DO".
This was not an answer to the question you asked which was about US taxation. For US purposes, the Toronto or Ottawa or Perth, Ontario Condo just becomes a second home. You may deduct the mortgage interest and property taxes on Schedule A of your US return.
Answers to this and other similar questions can be obtained free on Air every Sunday morning.
Starting this Sunday at 9:00 AM on 600AM in Vancouver, Fred Snyder of Cartier Partners and I will be hosting an INFOMERCIAL but LIVE talk show called "ITS YOUR MONEY"
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