Subject: Trust a Trust?
Expert: taxman at centa.com
Date: Wednesday December 06, 2006
Time: 12:46 PM -0500
QUESTION:
QUESTION: I have just received my permanent residence
visa and have two months left before I enter Canada as a
permanent resident. I am American and my Canadian wife
lives in Vancouver. I have rental property in the states
along with retirement accounts and non-retirement
taxable accounts - also no kids at this point. Is it worth
setting up a U.S. trust to avoid Canadian taxation for 5
years? If so what kind of trust would that be?
Thank you so much. I'm new to this cross border situation
and any information you might have would be greatly
appreciated
Sincerely,
-----------------------------------
david ingram replies:
In 43 years, I have never seen a 5 year trust set up for an American. The
reason is that you would still end up paying US tax on the trust earnings
and you have not really saved anything.
The five year immigrant trust works best when you are coming from any
country but the USA.
A Greek, for instance, can set up his five year trust on the Isle of Mann
and not pay tax anywhere. However, if you as a US citizen do the same
thing, you end up with $5,000 worth of reporting rules because you have a
foreign trust and have to do things like form 3520 and 3529A and TDF
90-22.1, etc.
Setting it up and not reporting it to the US is punishable by a fine of up
to $500,000 PLUS up to five years in jail.
And although it is getting hard to believe, a single person living in a
rental house in Sand Francisco pays more income tax than the same person
living in West Vancouver, BC.
A married couple with two equal or almost equal incomes will pay more in
California than BC or Alberta. However, because of the joint tax return a
married couple with only one sizeable income will pay slightly less in
California. But if it is tax savings you want, forget about Canada and move
to Tennessee, Nevada, New Hampshire, Washington, Florida, Texas or Alaska
where there is no state tax.
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