My_question_is: Both question: Our aging parents have condo in Phoenix valued at US$150,000. What happens(tax wise)IF: 1) it is SOLD 2) it becomes part of Estate for Canadian beneficiaries. --------------------------------------------------------------------------- david ingram replies: This question was rejected and picked out by me because I had to kill half an hour. 1. If the condo is sold, your parents would need to file a US Federal 1040NR and an Arizona 140NR return. It is also possible that if they are there 4 or 5 months a year, they would need to file a 1040NR with a 4868 and Schedule D and a 140PY (for a part year resident). If the property has gone up in value, they will pay tax to both the US Federal government AND the state of Arizona. Then, they would report the sale on schedule 3 of their Canadian T1 returns and claim a foreign tax credit for the tax paid to the US by filling in forms 2209 for the Federal Portion and 2306 for the Provincial portion if any. Note that only 1/2 of the capital gains tax paid to the US can be used as a foreign tax credit in Canada. 2. The answer here is in a flux. If they died today and left you or you and siblings the condo and their estate was less than $3,500,000 in total, there would be no US Estate Tax. If they died in 2010 and Obama reduces the Estate tax exemption in the US as he promised to do in his election platform, it could be taxable. If they both passed in 2009 and the estate was a total of $5,000,000, the tax would be calculated on $1,500,000. The US estate tax would then be $150,000/$5,000,000 x's the tax on $1,500,000 The Estate tax paid to the US would then be a tax credit against capital gains tax on their final returns in Canada. ------------------------------ These older questions will help as well. taxman at centa.com: Please see bottom of message if you wish to unsubscribe. ------------------------------------------ -------------------------------------------------------------------------------- David You mentioned an estate handout that did not make the printer for the Ozzie Jurock Seminar on Saturday and that you would mail it out to anyone who wanted one. Please send mine to: XXXX XXXXXXXXX Calgary XXXX -------------------- david ingram replies: I did not mean mail as in snail mail. However the following is now being sent to your email address. ------------------------------------------------ Hi David, Last night someone told me that if a Canadian resident dies owning assets in the US in excess of $60,000, then all his world assets are taxable by the IRS. I find that hard to believe. Thanks for your help. ---------------------------- david ingram replies Yep, the answer or what you have heard is true but the $60,000 has not been a limit since 1988. If it is real estate or other capital assets any amount is subject to US estate tax with varying exemption amounts depending upon the year and total world estate. In addition, if you die owning more than $1,199,999 of US stock and you have NEVER been to the US or even North America if you live in France or any of the other 260 odd counties in the world, your stock estate is subject to US estate tax. (I admit the $1,200,000 number may have changed and be higher or lower now but spent 1/2 an hour looking and could not find a change - if anyone reading this knows of a change, please let me know - its origins were in the 1995 changes to the tax treaty) Very FEW Securities people know this. *** Remember, that the gain is in US dollars in the US and Canadian Dollars in Canada. When calculating the profit on the stock, you would use the Canadian / US exchange rate at the time of the purchase for cost and then use the rate at the time of death for the deemed disposal So, when it comes to that second home in Palm Springs (as an example). You bought it for $1,000,000 US on Sept 1, 1998 That would cost you (in Canadian Dollars) $1,525,700 Canadian. You died on Sept 1, 2008 and the property is now worth $1,400,000 US after going up to $2,000,000 US and then losing 30% in the last two years. For US estate tax purposes, the property will represent $1,400,000 in your estate. For Canadian tax, the $1,400,000 US was worth $1,489,740 and there would be a Personal Property Loss of $35,960 which can be used to offset gains on the Whistler ski chalet. Hope this helps. ------------------------------ The following older question will help you out a bit. Hi David, Is it true that a Canadian citizen, who owns a house in US, who is not a resident or a citizen of US may be subject to US estate tax on all property held upon death of that Canadian citizen? --------------------------------------- david ingram replies: The answer is yes but no tax is paid on the Canadian Property The value of the Canadian Property is used to determine the amount of US estate tax on US form 706N and then the figure is prorated. For instance for 2008, there is no estate tax on amounts under $2,000,000 In 2009, there is no tax on amounts over $3,500,000. Depending upon the election and who wins and who controls the congress and senate, Obama plans or proposes to freeze estates exemptions at $3,500,000 and have a graduated estate tax that caps at 45%. McCain plans to raise the estate exemption to $5,000,000 and have a maximum estate tax of 15% much more desirable to those with money. However, in 2007, Today - if you die tomorrow, the limit is $2,000,000 and you are taxable on amounts over that. Let's pretend that you have a $300,000 US property and die on November 1, 2008. You are subject to estate tax on $1,000,000. Pretend that the estate tax is exactly $345,800 on the $1,000,000 which exceeds the $2,000,000 exemption. Your estate tax would be $34,580 which is 10% of the estate tax because your US property is 10% of your total estate. The good news is that the $34,580 can be used as a foreign tax credit against and capital gains tax owed by the estate on the property. So, as an example. If you died in November and you had paid $100,000 for the property, your estate would have a deemed disposal and there would be capital gains tax on the $200,000 profit on the property. If the rest of your income in the year was $100,000, $100,000 would be added to your taxable income and your Canadian estate would owe about $40,000 (depending upon the province). However, you would claim the $34,580 as a foreign tax credit against the $40,000 And your Canadian tax would be reduced by much, if not all of the $34,580 by using Canadian forms T2209 and T2036. Warning - there is also an Estate Tax in most states. Most use the Federal rates for exemptions, etc. but some start from scratch. Hope this helps. ------------------------------------------------------------- SUGGESTED PRICE GUIDELINES - Aug 5, 2008 david ingram's US / Canada Services US / Canada / Mexico tax, Immigration and working Visa Specialists US / Canada Real Estate Specialists My Home office is at: 4466 Prospect Road North Vancouver, BC, CANADA, V7N 3L7 Cell (604) 657-8451 - (604) 980-0321 Fax (604) 980-0325 Calls welcomed from 10 AM to 9 PM 7 days a week Vancouver (LA) time - (please do not fax or phone outside of those hours as this is a home office) expert US Canada Canadian American Mexican Income Tax service help. email to taxman at centa.com www.centa.com www.david-ingram.com pert US Canada Canadian American Mexican Income Tax service and help. David Ingram gives expert income tax service & immigration help to non-resident Americans & Canadians from New York to California to Mexico family, estate, income trust trusts Cross border, dual citizen - out of country investments are all handled with competence & authority. Phone consultations are $450 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or is to be returned to Canada or a phone consultation is in Canada. ($472.50 with GST for in person or if you are on the telephone in Canada) expert US Canada Canadian American Mexican Income Tax service and help. This is not intended to be definitive but in general I am quoting $900 to $3,000 for a dual country tax return. $900 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only (but were filing both countries) - no self employment or rentals or capital gains - you did not move into or out of the country in this year. $1,200 would be the same with one rental $1,300 would be the same with one business no rental $1,300 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes. $1,600 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits no move in or out $1,700 would be for two people with income from two countries $3,000 would be all of the above and you moved in and out of the country. This is just a guideline for US / Canadian returns We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $200.00 up. However, if you have a stack of 1099, or T3 or T4A or T5 or K1 reporting forms, expect to pay an average of $10.00 each with up to $50.00 for a K1 or T5013 or T5008 or T101 --- Income trusts with amounts in box 42 are an even larger problem and will be more expensive. - i.e. 20 information slips will be at least $350.00 With a Rental for $400, two or three rentals for $550 to $700 (i.e. $150 per rental) First year Rental - plus $250. A Business for $400 - Rental and business likely $550 to $700 And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return. Moving in or out of the country or part year earnings in the US will ALWAYS be $900 and up. TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return. 8891 forms are generally $50.00 to $100.00 each. 18 RRSPs would be $900.00 - (maybe amalgamate a couple) Capital gains *sales) are likely $50.00 for the first and $20.00 each after that. Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be from $150 to $600.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc. Note that these returns tend to be informational rather than taxable. In fact, if there are children involved, we usually get refunds of $1,000 per child per year for 3 years. We have done several catch-ups where the client has received as much as $6,000 back for an $1,800 bill and one recently with 6 children is resulting in over $12,000 refund. Email and Faxed information is convenient for the sender but very time consuming and hard to keep track of when they come in multiple files. As of May 1, 2008, we will charge or be charging a surcharge for information that comes in more than two files. It can take us a valuable hour or more to try and put together the file when someone sends 10 emails or 15 attachments, etc. We had one return with over 50 faxes and emails for instance. This is a guideline not etched in stone. If you do your own TDF-90 forms, it is to your advantage. However, if we put them in the first year, the computer carries them forward beautifully. --IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, please be advised that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used or relied upon, and cannot be used or relied upon, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.-- -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 for expert help, assistance, preparation, or consultation in connection with personal or business affairs such as at www.centa.com or www.garygauvin.com. If you forward this message, this disclaimer must be included." - -------------------------------------------------------------------------------- No virus found in this incoming message. Checked by AVG - www.avg.com Version: 8.5.325 / Virus Database: 270.12.24/2108 - Release Date: 05/11/09 05:52:00 -------------- next part -------------- An HTML attachment was scrubbed... URL: http://www.centa.com/CEN-TAPEDE/centapede-us/attachments/20090511/9dadd058/attachment-0001.html
