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Sent: Wednesday, June 16, 2004 6:22 PM
To: [email protected]
Subject: Please help me with some cross border tax questions
Hello david,
I found the extract of your 'Border book' very interesting and
informative.
I have a cross border tax returns to prepare and would like some
advice from a tax expert.
Here is the scenario:
The client is a US resident living and working in MA, USA. He has
a
rental property in Vancover BC Canada. A Canadian tax preparer
prepared his
Canadian tax returns. The returns shows rental income of $13,100
BUT zero
Net Income ( income of 13,100 less expense of 13,100). The rental
property was
put into service in April 2003.
Question:
1) Can he claim on his US tax returns all the taxes (Transfer,
GST, PST) he paid to
acquire the rental property as a Foreign Tax Credit. OR are these
taxes just figures to be used to adjust
the cost basis of the property. Please let me know.
2) Do I have to prepare a US fed form Schedule E and 4562 using
converted dollar figures
(canada to US) and also show ZERO net income.
Your respose to these two questions will be highly appreciated.
CXXXXXX
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david ingram replies
1. The three taxes mentioned are not income taxes. they form
part of the adjusted cost base of the property.
2. Convert the Canadian Dollars to US dollars and put them in
the relevant place on Schedule E and the 4562 depreciation form.
For US purposes, this will create a tax deductible loss.
If there had been a profit, you would have claimed the foreign
tax credit on form 1116.
I am including an answer I gave out a couple of days ago for your
information.
=============
This question came from Ozzie Jurock's real estate website at
www.jurock.com an excellent source of real estate information.
For those wanting Canadian Mutual Fund advice, they should look
at Fred Snyder's www.mutualfund101.com site.
My question is: Applicable to both US and Canada
QUESTION: My wife and I are American citizens who have recently
bought rental property in BC. We are planning to
immigrate to Canada in the next few years. After our
purchase we wanted to have a Canadian accountant help
us with NR6's and any other tax involvements down the
line. The accountant we worked with charges us $750 for
an initial consultation and filing an NR6 for each of us.
This seemed rather pricey for the minimal work involved
and the fact that we needed to also find our own
guarantor. I would like your opinion about going rates for
this work and perhaps some idea of your fees were we to
work with you in the future.
Thanks for you very helpful
Q&A column.
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david ingram replies:
My typical charge for the same service would be $700 plus $49.00
GST which would put you in the same price range.
The NR-6 is available at:
http://www.ccra-adrc.gc.ca/E/pbg/tf/nr6/nr6-00e.pdf
Depending upon the property and for a further fee, we will also
act as the tax agent and have associated rental agent services as
well.
I prefer to say that I charge you for the time and advice and
throw in the form. I generally charge $350.00 an hour for US /
Canadian tax and Immigration consulting (both directions).
Although, the form is a minimal one, the advice and
implementation is important and there are few of us doing it so
it is a supply and demand phenomenon.
When it comes to the final returns, we will prepare the Canadian
Returns AND US and state at the same time or the Canadian Returns
and a dummy US return so that your US accountant can just plug in
the figures and not spend hours figuring out where and how to put
them in to his or her system.
If you go to www.centa.com and read the "US/Canada Tax" Section
in the second box down on the right hand side, it will give you
an idea of the ifferences between the two countries.
If you go to the Tax Guide section, you will find a chapter on
renting in Canada.
And if you are serious about immigrating to Canada, be advised
that processing times have increased dramatically in the last
year.
The following was my answer a short time ago to someone
immigrating from Great Britain.
david ingram replies:
You will first have to decide if you qualify to immigrate to
Canada. You could come as an immigrant (easier under 50) or you
could come as a business investor but I do not think that a bed
and breakfast would qualify but someone will comment from the
list this goes to (with your identification removed.)
To start with, you should go to
http://www.cic.gc.ca/english/newcomer/guide/index.html and read
the Canadian Government's site on immigrating to Canada
Make sure that you fill in the self-assessing questionnaire at
http://www.cic.gc.ca/english/skilled/assess/index.html If you get
67 points on this self-assessment, , you will qualify if nothing
else rears its head. The mark was 75 just a couple of months
ago. If you get the 67, let me know and we can continue on from
there.
As a new immigrant, you can set up an offshore trust to protect
your assets from Canadian tax for five years. If you do this,
you are only taxable on amounts earned in the trust that you take
out to live on. This does not make sense to me though because if
you are going to buy a house for a B & B a wife and two almost
adult kids, it will take most of your money to buy one and you
should pay cash for the best tax break. If you need money after
for investment, borrow against the house and the mortgage
interest will be deductible. Goto www.centa.com and read the Nov
2001 newsletter for more information on this.
Your house in Great Britain is taxable in Canada also but any
increase in value will not be taxable if you leave Canada within
ten years..
You should also go to www.centa.com and read the US/Canada
taxation section. Although it might seem that it does not apply
to you, 95% does and Article IV of the US/CANADA Income Tax
Treaty is almost word for word with the UK/CANADA Income Tax
Treaty. The only exception is that you do not have to file a US
income Tax return but will continue to file an A4 GB return to
report your rental in GB.
I am available for phone consultations by the way. The fee would
be $350.00 Cdn for an hour or part. I do not, as a rule, usually
charge for a quick follow up to that question you did not
understand and if you want a 1/2 hour now and 1/2 an hour later,
I am amenable to that as well. It will give you time to ponder in
between. However, I charge for the full hour at the first
billing.
Answers to this and other similar questions can be obtained free
on Air every Sunday morning.
Every 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"
Those outside of the Lower Mainland will be able to listen on the
internet at
www.600AM.com
Local phone calls to (604) 280-0600 - Long distance calls to
1-866-778-0600.
Old shows are archived at the site.
David Ingram's US/Canada Services
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Res (604) 980-3578 Cell (604) 657-8451
(604) 980-0321
New email to [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"
This from "ask an income tax and immigration expert" from
www.centa.com or www.jurock.com or www.featureweb.com. Canadian
David Ingram deals daily with tax returns dealing with
expatriate:
multi jurisdictional cross and trans border expatriate problems
for the United States, Canada, Mexico, Great Britain, the United
Kingdom, Kuwait, Dubai, Saudi Arabia, South Africa, Thailand,
Indonesia, Egypt, Antarctica, Japan, China, New Zealand, France,
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Bolivia, Scotland, Ireland, Hawaii, Florida, Montana, Morocco,
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Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent,
Grenada,, Virgin Islands, US, UK, GB, American and Canadian and
Mexican and any of the 43 states with state tax returns, etc.
Your name has been added to our email list because of an
enquiry we have received, we may not answer your question but
another similar question will be as we lump them.
You may find more answers at www.centa.com
David Ingram of the CEN-TA REALTY Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
(604) 980-0321 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
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