Sent: Tuesday, February 21, 2006 3:22 PM
To: taxman at centa.com
Subject: US/Canadian tax advice
Hi –
I am an American citizen and my wife is a Canadian citizen
(permanent resident alien status) and reside permanently in the
US.
Four years ago, we purchased a cottage in Canada that we rent out
to the public in the summer.
We have not filed any Canadian tax returns and have not included
any income or costs related to the cottage on our US tax returns.
I am looking for some advice in this matter.
Thanks
---------------------------------------------------------\r
david ingram replies:
You are responsible to file section 216(4) tax returns to Canada
and the US even if you lose money.
The penalty if the forms are not filed within two years is 25% of
the GROSS rent with no deductions allowed.
In general, you would each file a T1 Section 216 return with a
T776 to report the income and expenses.
The amounts would then be converted to US dollars and reported on
Schedule E of your 1040. If you had paid tax to Canada, you
would calculate the US foreign tax credit on form 1116.
We, of course would be glad to look after this for you and apply
to have the late filing penalties cancelled. In general (but not
always) a voluntary disclosure is accepted the first time.
-------------------------------
David Ingram's US/Canada Services
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email to taxman at centa.com
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