QUESTION: In 1996 my mother and father purchased a home (for $95,000)
 to which was deeded to myself and my brother in the event they would 
someday require nursing care and couldn't afford it (they didn't want
 government to take it). 
 
Parents have both recently passed on and house has been sold 
for $172,000.
 
Are there tax impication for myself and my brother? 

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david ingram replies:

If they paid for the house and all the upkeep and maintenance on the house for the last ten years, then it was their house and you were just holding it in trust for them as/like a life estate (paperwork would have been nice).

In that case, it would be tax free up to the date of death. 

Any increase from the date of death to the date of sale would be taxable although the costs of sale might be enough to wipe out that gain if the sale was soon after their deaths.

QUESTION: I own 2 rental properties, and am thinking of selling them both.
Both are jointly owned with another person.
The other person, in each case makes significantly more or less money than myself.
Is selling them in different years beneficial to me, tax wise?
Can one person alone claim the capital gains, or do both owners need to claim equal amounts?
I am Canadian, and the properties are in Canada. Thanks!!
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david ingram replies:

It depends upon what your income is. If your other income in the year is over $120,000, it will not make any difference.

If your other income is over $80,000 it will not make much difference.

If your other income is lower than $30,000 it will likley make a 10% difference.

The reason is our progressive tax bracket.

For instance if your income is $100,000, your tax is about 29,000. If you add another $100,000, that $100,000 is close to $42,000 more and if you added another $100,000, the tax would be 44,000 more depending upon the procvince you live in. since each province has a different tax bracket.

The capital gains tax should be paid byt the owners based up thier percentage of ownership. For instance, it is not unusual for rental partnershps to be 1/16th, 1,4, 1/3, 1/2, etc.

Whatever percentage of the profits the parteners are splitting should be the same percentage that the partners pay tax on.

QUESTION:

I am a Canadian citizen and an Ontario resident. I will become a Hong Kong resident next year. My question is, I current have an Ontario company which hold a large part of my assets in equity and over the years have accumulated significant gain. Is there any point to change my director status to non-resident and withdraw money over several years, or simply fold up the company now. I am not familiar with the tax consequence, assuming maximal personal tax rate. Thank you. --------------------------------------------------------------
david ingram replies:

I am going to make an educated guess that you would be just as well off to wait until you are gone for a year and then pay all retained earnings out to your self as a dividend.  This should give you a net tax of about 25% which should be less than leaving a non-resident personal holding company in Canada.

However, you should also have your accountant figure out what the tax would be if you paid it all out to yourself as a dividend while a Canadian resident so that you can take advantage of the dividend tax credit which just might work out to less tax.  in particular, if you were to pay it out in a 'short year' the dividends would NOT be added on top of a year's other income as it would be  if you took them all out in 2007.  This could be a time when leaving the country on jan 31st or so could be good tax planning.

Remember as well that you have to file form T1161 and possibly forms 1243 and 1244 with your departing tax return.  You would file these forms if you are going to leave the company intact when you leave.

Have your accountant figure it out 2 1/2 ways.

Keeping the company in Canada is one of the Canadianisms which Judge Teskey lists in his lists of things that can make you taxable in Canada on your world income.

I would say that either way, you want to get rid of the company.

Read the folowing which is extacted from the center of the US/Canada Taxation section in the second box down at www.centa.com.





Well, to leave Canada for tax purposes, you must give up clubs, bank accounts, memberships, driving licences, provincial health care plans, family allowance payments (if you are a returning resident, you can continue to get Family Allowance out of the country), your car, and furniture. You can keep a house here as an investment and rent it out, but it must be rented on lease terms of a year or more. And you MUST have an agent sign an NR6 for you (see example). This NR6 has the Canadian Resident AGENT ** guarantee the Canadian Government that if YOU do not pay your tax to Canada, the AGENT WILL. Even after fulfilling the foregoing, the Canadian government can still tax you or "try" to tax you on your income out of the country. If you are being paid by a Canadian Company, they can quite often succeed.

Even though you can collect family allowance out of the country, don't! One client's wife found out that she could get family allowance out of the country if she said they were coming back to Canada. She got some $3,000 of family allowance and cost the family some $80,000 in income tax when they came back to Canada from Brazil. I will never forget the husband's expression when he found out why he had been reassessed and I will never forget his wife's explanation. She said he was a skinflint and never gave her any money. The total episode cost them their house.

** The "agent" referred to above can be a friend, relative, or a business such as ours. We charge a minimum of $40.00 per month to be an "AGENT" for an NR-6 filing. This $480 per year is "in addition" to any other fees but "well worth it" of course. It stops your mother, father, brother, next door neighbour or ex-best-friend from being plagued by paperwork they do not understand.



It is possible to be physically "in Canada" and be treated as a Non-Resident and it is possible to be out of the country for seven years, or never have even lived in Canada, but wanted to, and be taxed as a Canadian resident as the following three cases show. In case you missed it, the reason for the different rulings is the "INTENT" of the parties involved.  Wolf Bergelt intended to leave Canada.  David MacLean was only working out of the country.  He still maintained a residence and could not ever become a resident of Saudi Arabia anyway. Dennis Lee "wanted" to live in Canada.

In 1986, Wolf Bergelt won non-resident status before Judge Collier of the Federal Court, even though he was only out of the country for four months and his family stayed behind to sell his house. He had given up his memberships, kept only one bank account and rented an apartment in California until his house in Canada was sold. Four months after his move, his company advised him that he was being transferred back to Canada. Judge Collier said his move was a permanent (although short) move and he was a non-resident for tax purposes for those four months.

In 1985, David MacLean lost his claim for non-residence status even though he was gone for seven years. He kept a house and investments in Canada and returned a couple of times a year to visit parents. He had even been to the Tax Office and received a letter on January 29, 1980 stating that his Canadian Employer could waive tax deductions because he was a non-resident. However, he did not advise his banks, etc. that he was a non-resident so that they would withhold tax, he did not rent his house out on a long term lease and he did not do any of the things that makes a person a "NON-RESIDENT". Judge Brule of the Tax court of Canada said that he thought Mr. MacLean had stumbled on the non-resident status by chance rather than by design. In other words, to become a non-resident of Canada, you must become a bone fide resident of another country.  As a rule, only a Muslim born in Saudi Arabia to Saudi Arabian parents can become a Saudi Arabian citizen.  The best that David MacLean can hope for is that he has a Saudi Arabian temporary work permit.

In other words, when a person leaves a place, they usually leave and establish a new identity where they are because the "new place" is where they live now. Trying to "look" like a non-resident is not the same as "BEING" a non-resident - think about it.

In 1989, Denis Lee won part but lost most of his claim for non-resident status. He was a British Subject who worked on offshore oil rigs. He maintained a room at his parents house in England and held a mortgage on his ex-wife's house in England. For the years 1981, 82 and 83 he did not pay income tax anywhere. in 1981 he married a Canadian and she bought a house in Canada in June of 1981. On September 13, 1981, he guaranteed her mortgage at the bank and swore an affidavit that he was "not" a non-resident of Canada. [As I have said in the capital gains section of this book, bank documents will get you every time.] During this time he had a Royal Bank account in Canada and the Caribbean but no Canadian driver's licences or club memberships, etc.

Judge Teskey said:

"The question of residency is one of fact and depends on the specific facts of each case. The following is a list of some of the indicia relevant in determining whether an individual is resident in Canada for Canadian income tax purposes. It should be noted that no one of any group of two or three items will in themselves establish that the individual is resident in Canada. However, a number of the following factors considered together could establish that the individual is a resident of Canada for Canadian income tax purposes":

• - past and present habits of life;
  
  
• - regularity and length of visits in the jurisdiction asserting residence;
  
  
• - ties within the jurisdiction;
  
  
• - ties elsewhere;
  
  
• - permanence or otherwise of purposes of stay;
  
  
• - ownership of a dwelling in Canada or rental of a dwelling on a long-term basis (for example, a lease of one or more years);
  
  
• - residence of spouse, children and other dependent family members in a dwelling maintained by the individual in Canada;
  
  
• - memberships with Canadian churches, or synagogues, recreational and social clubs, unions and professional organizations (left out mosques);
  
  
• - registration and maintenance of automobiles, boats and airplanes in Canada;
  
  
• - holding credit cards issued by Canadian financial institutions and other commercial entities including stores, car rental agencies, etc.;
  
  
• - local newspaper subscriptions sent to a Canadian address;
  
  
• - rental of Canadian safety deposit box or post office box;
  
  
• - subscriptions for life or general insurance including health insurance through a Canadian insurance company;
  
  
• - mailing address in Canada;
  
  
• - telephone listing in Canada;
  
  
• - stationery including business cards showing a Canadian address;
  
  
• - magazine and other periodical subscriptions sent to a Canadian address;
  
  
• - Canadian bank accounts other than a non-resident account;
  
  
• - active securities accounts with Canadian brokers;
  
  
• - Canadian drivers licence;
  
  
• - membership in a Canadian pension plan;
  
  
• - holding directorships of Canadian corporations;
  
  
• - membership in Canadian partnerships;
  
  
• - frequent visits to Canada for social or business purposes;
  
  
• - burial plot in Canada;
  
  
• - legal documentation indicating Canadian residence;
  
  
• - filing a Canadian income tax return as a Canadian resident;
  
  
• - ownership of a Canadian vacation property;
  
  
• - active involvement with business activities in Canada;
  
  
• - employment in Canada;
  
  
• - maintenance or storage in Canada of personal belongings including clothing, furniture, family pets, etc.;
  
  
• - obtaining landed immigrant status or appropriate work permits in Canada;
  
  
• - severing substantially all ties with former country of residence.
  
  

"The Appellant claims that he did not want to be a resident of Canada during the years in question. Intention or free choice is an essential element in domicile, but is  entirely absent in residence."

Even though Dennis Lee was denied residency by immigration until 1985 (his passport was stamped and limited the number of days he could stay in the country) and he did not purchase a car until 1984, or get a drivers licence until 1985, Judge Teskey ruled that he was a non-resident until September 13, 1981 (the day he guaranteed the mortgage and signed the bank guarantee) and a resident thereafter.

My point is made. Residency for "TAX PURPOSES" has nothing to do with legal presence in the country claiming the tax. It is a question of fact. My thanks to Judge Teskey for an excellent list. The italics are mine and refer to the items which I usually see people trying to "hold on to" after they leave and are trying to become non-residents. No single item will make you a resident, but there is a point where the preponderance of "numbers" leap out and say, "He / She is a resident of Canada, no matter what he / she says." 

The case above is not unusual in any way. It is a fairly typical situation in my office.

In 1990, John Hale was taxed as a resident on $25,000 of directors fees he had received from his Canadian Employer and on $125,000 he received for exercising a share stock option given to him when he had been a resident of Canada (the option, not the stock). Judge Rouleau of the Federal Court ruled that section 15(1) of the Great Britain / Canada Tax Convention did not protect the $125,000 as it was not "salaries, wages, and other remuneration". It was, however a benefit received by virtue of employment within the meaning of section 7(1)(b) of the act.

Even a car you do not own can make you a resident as the next sailor found out.

In 1988, FrederickReed was claimed by the Canadian Government as one of their own. He lived on board ship and shared an apartment with a friend in Bermuda but only occasionally. He also stayed with his parents in Canada when visiting his employer in Halifax. Judge Bonner of the Tax court ruled that he could not claim his place of employ or the ship as his residence and just because he did not have a fixed abode, did not make him a non-resident. He was also the beneficial owner of a car in Canada which even though of minor consequence, served to add to his Canadian Residency. He had in fact borrowed money from a credit union to buy the car, even though it was registered in his father's name. He had maintained his Canadian Driver's licence as well.

An interesting case in June, 1989 involved Deborah and James Provias who left Canada in October of 1984. They had sold a multiple unit building to James' father on September 21, 1984 but the statement of adjustments did not take place until December 1, 1984. They tried to write off rental losses and a terminal loss against other income as `departing Canadians'. Judge Christie of the Tax Court ruled that they had left before the sale and were not entitled to the terminal loss or another capital loss as these could only be applied against income earned in Canada from October 13, 1984 (the day they left) to November 30, 1984 (the day before the sale) and there was no income, only a rental loss.

But June, 1989 was a good month for Henry Hewitt. He had been a non-resident living in Libya for four years and received some back pay after returning to Canada. DNR tried to tax him on the money but Judge Mogan of the Tax Court came to the rescue. He ruled that although Canadians were usually taxable on money when received, that assumed that the money itself was taxable in Canada, which was not true in this case.

In 1989, James Ferguson lost his claim for non-residency status but from the information, it didn't stand a chance anyway. He had been in Saudi Arabia on a series of one year contracts for four years. His wife remained employed in Canada, and he kept his house, car, driver's licence, union membership, and master plumber's licence. Judge Sarchuk ruled that he had always intended to return to Canada and was a resident.

A similar situation involved John and Johnnie M. Eubanks in the United States. He was working on an offshore oil rig in Nigeria with a Nigerian work permit and attempted to claim non-resident status for the purposes of exempting the foreign earned income exclusion. His wife was in the United States at all times and because he worked 28 days on and 28 days off, he returned to the U.S. for his rest periods using 4 days for travel and 24 days for rest with his family. He did not spend any 330 day period (out of a year) in Nigeria and only had a residency permit for the purposes of working in Nigeria. Judge Scott ruled he was a resident of the U.S. and taxed him some $20,000 with another $6,000 penalties and interest.

The Tax departments in Canada and the U.S. issue Interpretation Bulletins and Information Circulars and Guidance Pamphlets. These documents sometimes get people in trouble because the individual reads the good part and doesn't pay any attention to the exceptions. The following case ran contrary to a Guidance Pamphlet issued by the IRS.

On and Off-shore Oil rigs were involved with William and Margaret Mount and Jesse and Mary Wells. William and Jesse worked in the United Arab Emirates. However, they kept their homes and families in Louisiana and kept their driver's licences in Louisiana and voted in Louisiana. No evidence was shown that they had tried to settle in The United Arab Emirates. Judge Jacobs turned down claimed exclusions of approximately $75,000 each.

There isn't any question about what oil rig people talk about on oil rigs. It has to be "how to beat the tax man". Unfortunately, they all seem to think it is easy. Another such story follows.

In 1989, Clarence Ritchie found out that bona fide residence means just what it says. You cannot be a non-resident of the U.S. for tax purposes if you are not a bona fide resident of another country. He was working on the Mobil Oil Pipeline in Saudi Arabia and although when he left he was married with a couple of kids, by the time he returned permanently, he was a happily divorced man. Judge Scott ruled that though he did not have an abode in the United States, he had not established one in Saudi Arabia and therefore was not entitled to the foreign earned income exclusion which requires you to be away for 330 days out of 365. He had worked a 42 days on, 21 days off schedule and usually returned to the U.S. for his days off although he did spend time in Tunisia, England, Italy and Greece.

On a final note, as explained on page 143 of the "PINK" 17th edition of my ULTIMATE TAX BOOK, it is possible to have three countries after you for tax. If you are thinking of taking a job because a recruiter told you the money is tax free, think twice and check three times with competent individuals about what the rules "really are". No government likes giving up the right to tax its citizens.



Non-residents of Canada with investments in Canada are subject to a 25% non-resident withholding tax on any money paid to them while they are out of the Canada. Therefore, if they have $10,000 in the Bank of Montreal and they live in Argentina, The Bank of Montreal must withhold 25 cents out of every dollar of interest paid to the account. Most tax treaty countries such as Great Britain, Germany, the United States, and Australia have a reciprocal agreement with Canada that limits the withholding to 15%. So we have the anomaly that a Canadian with money in a bank in the U.S. has no withholding but an American with money in a Canadian Bank has 15 cents out of every dollar withheld as a foreign withholding tax. The American would report his interest on schedule A of his 1040 tax return and claim the tax withheld as a foreign tax credit on a form 1116.



More important perhaps is the problem with rental properties in Canada. When owned by a non-resident, they are subject to a 25% withholding (or 15% if living in Bangladesh) tax. If the renter does not pay this tax,  the government can come along two years later and demand the tax.

Imagine the consternation of a tenant of a house in the British Properties in West Vancouver, or Rosedale in Toronto. Assume the tenant has been paying $2,000 a month for a $500,000 house owned by a Hong Kong resident. After three years of paying $24,000 a year to the `non-resident', they finally buy a house and move. Two months later, there is a knock on the door and a National Revenue representative is standing there demanding 25% of $72,000 for NON-RESIDENT withholding tax (this is a true story by the way, only the owner was in London).

There is a way around this problem. The tenant can ask to see, or rather DEMAND to see a copy of the landlord's filed and accepted NR6 form. (See forms in back of book). This form allows the tenant or agent of the landlord to deduct a lesser amount (or nil if a loss) than 25% of the gross rent. It allows for expenses to be taken off and the tax can then be withheld at 25% of the net, rather than the gross. The property management division of david ingram & Associates Realty Inc. files about 300 of these NR6 forms a year. (This is only necessary if you are paying directly to a landlord whom you KNOW to be a non-resident of Canada.  If you are paying to an agent or Canadian Resident, you are okay.)

Please note, the NR6 MUST BE FILED BEFORE the first rent cheque is received or 25% of the gross rent must be remitted. For years, we were in the habit of filing `this years' NR6 late with last years tax return. In 1989, National Revenue stopped accepting this sloppy practice and demanded them on time.

IF YOU SIGN THIS FORM AS AN AGENT, AND THE OWNER DOES NOT FILE HIS OR HER RETURN BY JUNE 30TH OF THE FOLLOWING YEAR, YOU, THE AGENT, ARE RESPONSIBLE FOR THE 30% OF THE GROSS RENT WITH NO REFUND PROVISIONS FOR ANYONE.

QUESTION:

I am currently in the process of divorcing my wife.  I jointly, with my wife and my 2 siblings and their spouses, own a cabin and recreation property in the interior, which has increased in value approximately $350,000 over 8 years.  We (all the owners) are in the process of selling this property.  My question is;  If I 'trade off' my interest in our family home to my wife for her portion of the recreation propery, can I claim the recreation property as my principle residence to avoid paying capital gains? 

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david ingram replies:

The question does not match the female email address but that does not matter for the answer.

It does, however, remind me of the old story of the fellow who walks into his lawyer's office and explains a case he wants to sue over and the lawyer looks pleased and says 

"you have a win there Rick!

Rick looks disappointed and gets up to walk out and the lawyer asks him why he does not appear happy. 

Rick says, "I told you the other sides's case".

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The answer to your question is that either your 1/6 share of the cabin or your 1/2 share of the family house can be tax free for both your spouse and yourself at the same time.  If you trade off the house for the cabin and the two of you elect to make the house tax free,  your share of the cabin can be tax free from the date of the trade-off but everything for you AND your spouse up to that date is taxable.  I am assuming here that the family home went up more than your share of the cabin.

When making the trade with your spouse, the lawyers should take your tax liability into account when figuring the trading dollar amount.

As an example, I want to assume that 'miraculously', you and your spouse were the owners of a $600,000 family home and a $600,000 ski cabin at Whistler.

Co-incidently, you had paid $200,000 for both properties and had never rented either unit out and they are both paid for.

.Family lawyers in this case, regularly trade off the house for the chalet and it seems even because you both end up with a $600,000 piece of real estate.

However, the tax situation looks like this.

If, in the divorce, you take over the ski chalet at your spouse's acb ($100,000) you now own a piece of property which has a taxable $400,000 capital gain inthe future -  If you were to sell it the next day, you would owe from $70 to 88,000 while your spouse would owe nothing if they sold the family home the next day.

There is a solution. 

As a person, you can elect to consider either your share of the chalet or the family home to be tax free and so can your spouse.

Therefore, your spouse should consider their share of the chaplet to be youir spouse's tax free piece of property up to the date of separation or divorce and you should consider your share of the family home to be your tax free residence.  That way, your spouse would transfer their share of the chalet to you at $300,000 instead of the elective original ACB of $100,000.

You would do the same thing with your spouse and transfer your share of the family house to your spouse at $300,000 rather than the elective $100,000.

That leaves your spouse with the future responsibility of paying tax on thier $200,000 share of the profit on the family home in the future ($300,000 - $100,000).  The nice part here is that if your spouse stays in the house for 20 years, they does not have to pay the $35,000 or so tax. 

The same is true of you.  You do not have to pay tax on the $200,000 of profit in the ski chalet until you actually sell it.  Because any future profits are tax free, the amount of tax is frozen and as you will agree, paying $30,000 tax 10 or 25 years from now will be like paying $15,000 or $5,000 today, depending upon inflation.

Now that was mainly a political statement.  It does not apply as much in your case because 'your' cabin is about to be sold soon and the present value of a dollar will not be much of a factor. I also bet that you more likely have a $1,000,000+ house and a $250,000- equity in the cabin to deal with.  In your case, the tax liability should be calculated and an adjustment made in the settlement.

Good luck, I am living in a house that I jokingly say I have bought 4 times.  Once for $42,000, once for $56,000, once for $160,000 and the last time for $641,000.  Divorce is expensive.

When you bring this up with the divorce lawyers, I can almost guarantee they will scratch their heads. In the 35 1/2  years that capital gains problems have been in effect, I have never once met a divorce lawyer who understood it on first look.

Judge Flannigan said it best 20 years ago back in the 80's.  I can not find the quote but it went something like this.

"With all due respect I do not think my colleagues on the bench understand the tax ramifications of divorce.  I think further with all due respect that there are a great many competent atorneys who draw up divorce agreements with little or no thought given to the tax consequences thereon." 

I may be out a word or three but the thought is exactly what he said and meant.

QUESTION: Hello sir
i am studying in poland for my masters in information and techonolgy i got j1 visa(ds-2019) for usa with 4 mothns visa work and travel i want to know is my visa is extenable or not i want to cahnge its status to any other visa how do all the process to extend the visa thanking u

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  david ingram replies:

Not my specialty --

You should contact

You should contact Joe Grasmick at www.grasmick.com or Greg Siskid at www.visalaw.com. 

QUESTION: David,
If I did not file a tax return in a prevoius year due to no income, am I still subject 
to a fine &/ penalty from CRA. My ex-spouse has all paperwork & I am seeking a restraining 
order in that department so I will have a hard time proving myself to CRA. 
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david ingram replies:

If you did not have any income there is no fine and no penalty.  If you had no income, you do not need anything in your es's possession, just file a tax return showing no income.

If you had a little income, go back to the bank, credit union, employer or two and ask them for duplicate copies of the infromation they sent to the CRA.

In an extreme case (and actually easier) go to (or write)  your local CRA office and ask them for copies of the information they have on file.  They will mail it to you.

Believe me, you are not alone.  I get a dozen people a month who have not filed for four or seven years and have lost their paperwork from a fire or they threw it out by accident or it got lost ina move or their girl friend / wife / boyfriend husband

1.   put the paperwork in a barrell ahnd burned it

2.   put it in the washing machine and made paper mache with it

3.   refuses to give it to them.

My favourite was when the cat used all that paper in a box to have kittens and sort of messed up the paper work.

Another time in my own office, 25 clients paperwork was absolutely destroyed when the Surrey Sewer system backed up into the office and flooded all the files which were neatly spread out on the floor.

The CRA has heard it all before and is sympathetic to your situation unles it is the third or fourth time.

QUESTION: Me and my husband own a second house, title and mortgage is in our names. 
My mother lives there for free, thus we do not declare any rental income. 
We want to sell the house. What's the best way to pay less tax or avoid it? 
Do I have to pay tax even if it's my mom's primary residence? 
Can I transfer a title in her name, she sells it as her primary residence and pays no tax? 

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david ingram replies;

This is the kind of income tax help I like giving because it deals with family matters and expert family matter income tax help is really hard to find.

If the house was yours, bought and paid for by you and mother did not pay anything towards its upkeep or its purchase, then, any profit on this second residence is taxable to you.

On the other hand if mom sold another property and put her money into this second residence which was registered in your name for estate purposes and mom paid the mortgage, hydro, gas and repairs, etc., then it is your mother's house and you only held it in trust for her.  She had a constructive trust as the owner of the propety and it would be tax free.

Your situation may be somewhere in between.  The problem is that for some reason or other few lawyers and tax people understand what a constructive trust is. Your mom, for instance, may not have had enough to buy the place you wanted so you and your husband ponied up more and rather than loan her the money, put it in your name to protect your interst from ohers.

In general, a constructive house is formed when a person who does not own a property (car, boat, mobile home, house, condo) treats it as their own by paying all the bills and doing all the maintenance, etc, as if it was their own.

If you put upa lot of money and mom put up half and you put it in your name to protect your money from the possibility that mom might die and you were trying to keep 'your' money from your siblings, it was likley your mother's and tax free.

If on the other hadnd, you and your husband are clearly getting all the money when the house is sold, you and your husband  will owe capital gains tax on the sale.

hope this helps.

And of course, when it comes time to do the return for the sale, you know where we are.

I'm a US citizen married to a Canadian who is a permanent resident of the US.  We both live & work in the US, and my husband is self-employed.  We intend to retire in Canada.  My husband will inherit an estate in Canada from his parents, and I have US retirement accounts (traditional IRA and 401k and Roth IRA).  I have an inheritance coming soon, and we are wondering what might be the most tax-advantageous way to invest it with an eye toward our eventual Canadian retirement.  Our local CPA suggested we contact a Canadian tax adviser, and I found you through a Google search.

Do you provide consultations of this type, and what would be your fee?  Could we accomplish this by email, with perhaps one or two phone conferences?  I look forward to your reply.  Please reply to both email addresses.  Thank you.

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david ingram replies:

I do consult on the items you have mentioned and am happy to deal with the taxation issues with regard to IRA, 401(K) and other retirement accounts.  However, I am not licenced in either country to provide specific advice on specific  shares.  If
 you do want that kind of advice, I can recommend two people.as in the following older q & a.

My pricing is also included further on.  In short, I charge $400.00 Cdn per hour for that type of advice.  It would be unsual to exceed three hours and in general, I do over half in one hour. 

To be up to date about the following Q & A, one reader did email me to say that they dealt with Stansberry (following) and were quite satisfied with their service.  That is out of an estimated 13,000 readers.  However, I have not done any further follow-up about them myself. I have done due dilligence over Dan Walkow and Darrel Thompson before recommending them here.

---------------------------------------------------------

QUESTION:

1. have been trying to find ethical investment firm to go with in Canada and can not seem to get any unbiased answers We live in Red Lake Ontario (landed immigrants), but are also US citizens

2. Is this Stansberry & Associates legit, as they seem to have many different opportunities claiming great returns
Pinchot Retirement Plan,  Master Limited Partnership, Market Index Target Term Security , Oakmark Select Funds
Thanks greatly looking forward to your email


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david ingram replies:
I have no good or bad knowledge about Stansbery and Associates. None of my clients deal with them to my knowledge.

From looking at their website, they seem to be a newsletter operation as mucyh as anything.  I have about 15 interviews with newsletter writers on gold (John Embry), oil, uranium (Martin Kafusa), silver (Sean Rahkimov) real estate (Ozzie Jurock), futures and commodities (Victor Adai), Resources in General (Elsworth Dickson, Publisher of Resource World)  etc at www.howestreet.com - mostly in the third column.

Two ethical people who specialize in selling securities, RRSPs, etc., to US citizens in Canada or Canadians in the US  are:

Mr Darrell Thompson
Blackmont Securities
Toronto
Local    (416) 874-8007
LD        (866) 775-7704
www.blackmont.com

AND

Dan Walkow
Seabank Financial
White Rock
Local     (604) 541-9952
L D        (866) 541-9952
www.seabankcapital.com
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These two individuals and their companies have gone to the effort to get themselves registered just about everywhere so they can deal with a Candian in Florida or California or Nevada, etc.
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Note that because of their specialty, they tend to deal with accounts in excess of $200,000

However, I am sure that both parties would welcome an exploratory call.

QUESTION:

1. Can a Canadian citizen with business in Canada buy vacation house in USA.         2. What are complications associated with tax and getting mortgage for such property.

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david ingram replies:

1.    Providing you do not have a criminal record which would stop your going to the USA, there is no reason why you can not buy a vacation home in California, Arizona, Texas, Florida, Alaska or any other US destination if you can afford it.

2.   I usually recommend that you borrow half in Canada and half in the US.  That will always qualify you for the US mortgage and you are moderately protected from foreign exchange which can be devestating. Use your Canadian house as security for the half down in the US. And, of course, the same thing is true in reverse. 

When you go to sell, you will pay tax first in the US (and maybe a state tax in California, Arizona, South Carolina, Vermoont, etc.)

This older question may help

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QUESTION:

Hi,

My wife and I are looking at possibly purchasing a condo in Palm Springs for our retirement. We are both 50 years old and plan on working for the next 7 or 8 years. Our plan is to purchase and use it a few times a year and rent/lease it out for the remainder of the year until we reach retirement at which time we would spend 4 or 5 months a years there. Looking for some advice on what we should be looking out for and what would be a better choice mortgage wise, U.S. or Canadian funding. Or is it a good idea at all to purchase U.S. real estate as a Canadian? Any advice or literature that's out there that you could direct us to would be greatly appreciated. Thanks!

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david ingram replies:

If your intention is to start spending significant time there, buying now is extemely sensible because you are buying it at today's price which will logically go up in the futre.  You 'are' of course, also dealing with exchange.

Since your earnings are in Canadian dollars, borrowing the money in Canada and paying cash in palm Springs means that you wil be paying in a known currency.

To explain that statement, persons who bought in 1991 with a US mortgage paymnet of $1,000 needed $1,145.87 Canadian dollars to make the payment.  By 2001, they needed $1,548.62 to stay even.

However, in reverse, if you bought in 2002, you needed 1,570.36 and only need about $1,060 to stay even today.

Currency exchange does go both ways.

You might want to borrow half in Canada and take out a mortgage for half in Palm Springs.

If you are renting the property, you will both need to file a US Federal 1040NR with Shedule E and California 540NR return and then change the currency  to Canadian and file form T776 with your Canadian T1 returns.  Failure to file the form 1040NR can have penalties of $1,000 to $10,000 per year per return per person even if you lose money.  A very real problem is that all sorts of Canadians approach a US accountant and ask about filing and are told they do not need to file a return because they are losing money.  Not so.  When it comes time to file, hunt down a specialist in dual country tax returns like Gary Gauvin in Dallas,, Steve Peters in Halifax, Kevyn Nightingale in Toronto, Brad Howland in Victoria or myself in Good Olde North Vancouver.

Whatever you do, do NOT buy it in a corporate name. You will not save anything and end up with another $2 or $3,000 of accounting fees.

You will also need to file personal US tax returns if you are there more than an average  of 120 days a year.

The following is from my April 1994 newsletter which you can find at www.centa.com in the top left hand box.  Note that it was written in 1994 and still appropos today.