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QUESTION:
Please help me with these questions:
1. I bought a home here and lived in it for a year plus but less than 2 years., then i moved to US permanently. If i decided to rent it out, waht is my residency definition?
2. I have other investments in canada like in mutual funds, RRSP. If all i have is investments in real estate and buisness but do not physical live in canada. What is my tax status for filling in canada. And what is best way to file in US for maximum tax benefit.
3. When the rental property is sold, what would be tax since it was partly used for residence while in canada for 1-1.5 years.
Thanks
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david ingram replies:
1. If the house has not been rented out and you have major investments here and have not told your banks and financial institutions that you are a non-resident, Canada can try and tax you under Article IV of the US Canada Income Tax Convention.
2. You sound like you might be a factual resident of Canada in which case you will have to report your world income to Canada but can deduct your US income on line 256 of the Canadian Tax return under Article IV of the US Canada Income Tax Convention or Treaty (1980)
3. The house was tax free until the day you moved and needs a value established. Since you say you left permanently, ALL OF YOUR ASSETS and their value had to be listed on form T1161. they are deemed to be sold on the day you left and the taxable profit has to be calculated on form T1243. Then you have to calculate the tax on the deemed profit on form T1244. If the deemed profit creates over $14,500 of Federal Income tax, you have to post security.
Failure to file T1161 on time will result in a minimum fine of $100 and a maximum fine of $2,500 calculated at $25.00 a day for 100 days. So - basically, if you are three months late with the form, the fine is $2,500 WHETHER YOU OWE TAX OR NOT.
This is the T1161 - read it and "weep"
http://www.ccra-adrc.gc.ca/E/pbg/tf/t1161/t1161-03e.pdf
This is the form to calculate the tax on the T1161
http://www.ccra-adrc.gc.ca/E/pbg/tf/t1243/t1243-03b.pdf
This is the form that defers tax on the deemed disposition
http://www.ccra-adrc.gc.ca/E/pbg/tf/t1244/t1244-03b.pdf
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