My question is: Canadian-specific

QUESTION: I am debating whether to buy a condo for an investment and rent it
out instead of contributing $500.00 per month to an RRsp I was going to buy
a condo for $100,000 and use it as a business with expenses and write offs
and claim it on my personal income tax at the end of the year and also have
the place rented out for $650.00 per month. My mtg would be about $700. per
month and My question is::: as a 10 year plan would I be better off doing
this than buying RRSP for the next 10 years as I can have tax write off's as
well as probable better gains over 10 years with the condo than a safe RRSP
??I currently work making about $80,000 per year and have about $100,000
already in RRSP and am 40 yr old.
---------------------------------------------------------------------------
david ingram replies:

In my experience, the rental condo would be a better investment over a ten
year period. There is much more time and effort involved but it returns the
larger and surer investment.

Do the math on a spread sheet at different inflation and interest rates.

Remember that both items are at historical highs at the moment so they will
both likely have a short term fall in the interim.

QUESTION:

My client lives and is a citizen of England. She wishes to purchase a secondary home in Georgia. My question is what would her taxes be as a temporary resident of the US? Is there anything else that I could do for her? I have already advised her to speak with a Real Estate lawyer.

Thank you,
____________________________________________
david ingram replies:

I do not see any Canadian tie in here, Great Britain but not Canada but that is okay.

In general, if she is a non-resident of the US and this is a vacation home and she is in the US less than 183 days in any year she has no income tax liability to the US or Georgia other than on any income she receives if she were to invest other monies in the US.

With regard to the house, if and when she sells it, she will be subject to both Georgia and Federal tax on any capital gain.
_______________________________________________________________________________

If she happens to spend more than 120 days a year for three years in a row or 150 days one year and 120 the next, she will also fall within the substantial prescence test rule of the US.

In this case, they take the days that she is present in the US ths year - let's say 140 and add 1/3 of the 150 days she was there the year before and 1/6th of the days she was there two years before. If this adds up to more than 183, she must file a form 1040 or a 1040NR plus an 8840 to prove that she has a closer connection to another country.

You can see that if a person is there for

2008 150 days 150
2007 90 days x's 1/3 30
2006 120 days x's 1/6th 20
for a total of 200 days which now requires forms 1040NR and 8840 to be filed.

Suggest that she goto www.centa.com and read the April 1994 newsletter in the top left hand box. This 13 year old newsletter makes the point that this is not new.

And, of course, if she is there for moe than 183 days in any one year whe is taxable in the USA on her world income and will file Federal Form 1040 and Georgia form 500

A couple of days ago I told a writer that he had to pay tax on the withdrawals from his 401(K) which is true but he or she can deduct the amount that he or she put in the plan which was not deductible as Nelson Andrew points out in the following.

Nelson, Andrew G. wrote:


http://www.cra-arc.gc.ca/E/pub/tp/it502/it502-e.pdf


paragraph 6:


"all amounts received out of or under the plan or

from the disposition of an interest in the plan constitute

income from an office or employment to the recipient in the

year received EXCEPT to the extent that they represent one or

more of the following amounts: ...


(b) amounts which represent a return of the EBP

beneficiary’s own contributions, ...."

http://www.cra-arc.gc.ca/E/pub/tp/it499r/it499r-e.pdf


has much the same verbiage.


I am unaware that CRA has changed these interpretations.
Gary Gauvin also has a Private tax ruling on this point:

http://www.garygauvin.com/WebDocs/CCRA/RevCan_403btxt.pdf

The ITA sections are still applicable. Remember, this is considered an
EBP, not a pension.

From: David Ingram [mailto:[email protected]]
Sent: Friday, March 23, 2007 12:11 PM
To: Nelson, Andrew G.
Subject: Re: US USA / CANADA Income Tax Help - IRA taxation in Canada
-David Ingram gives expert income tax & immigration help to non-resident
Americans & Canadians from New York to California to Saudi Arabia to
Mexico to China or Chile - Cross border, dual citize

If you can find where it is being granted 'now' I and thousands more
would appreciate it. they stopped four years ago as far as I know,.

david

Nelson, Andrew G. wrote:

CRA does grant relief for employEE contributions made to 401(k)/IRA
while resident of Canada. This has long been their position. A
withdrawal from an IRA would be treated as a combination of
non-taxable
employee contributions, plus taxable employer contributions, plus
taxable growth.

I can dig up the CRA reference if you would like.

By the by, the latest budget mentioned that treaty negotiations where
on-going on this very subject, with the goal of harmonizing the
treatment of cross-border pension contributions.

QUESTION: Hi. My husband and I own a home in toronto. We lived in it for 4 years before he accepted work in Germany. We rented it out thinking we will only be away for 2-3 years. We have now been away for 6.5 years. It is still rented. In the last year my husband was transfered to the U.S. I have been paying Canadian taxes over this time period. My principal residence is considered at my parents' home, to simplify post pick-up.

We are now considering buying a home in the U.S. and would like to sell our Toronto home. Do I need to live in the house again, or can I sell it without incurring the capital gains tax? We have not yet bought another home and are renting ourselves.

---------------------------------------------------------------------------
david ingram replies:

There is nothing you can do to make the house tax free. It has been subject to Capital Gains Tax since the moment you left Canada. Moving in triggers an immediate tax liability unless you make an election in writing under Section 45(3),. For years, the CRA accepted the election on line 256 of the return as in writing, but we suddenly have one where they have not accepted it so my suggestion is that the election must be made in writing on a separate piece of paper.

This older question points it out in other words.

My question is: Canadian-specific
>
> QUESTION: We in the process of purchasing a house in Penticton and will rent it out, retire (in about 4 years)and move into it ourselves. If we live there for 2 or more years are we liable for capital gains for the period we collected rental income? What type of home insurance is best for a rental property? What are your thoughts re the real estate market in the Okanagan in the next five years - steady growth or a slump after "2010"? Many thanks, Jacalin
>
> ---------------------------------------------------------------------------
> david ingram replies:

You are liable for capital gains income tax for the period you rented it out. In fact "When you move into the house", you will trigger a capital gains tax because of a change in use from a business use to a personal use.
The good news is that you can make an election under Section 45(3) of the income tax act to defer paying the tax until you actually sell the property. To make the calculation, fill in schedule 3 and put the taxable profit on line 127 of your T1. then deduct the same amount on line 256 under Section 45(3).

I think the Okanagan AND the lower mainland markets are already overheated and think the prognosis is for little or no growth for the next five years but I have been wrong before.

That does not mean you should not buy because if I am wrong, it will cost so much more to buy six or seven years from now that you will be cursing me all the way to the mortgage broker. If you buy and it goes down a bit, it does not matter because you are buying it to live in and that gives you the property in the future at today's price which is historically lower.

QUESTION: hi,david

i am immgrant from china,and i brought cash usd7000.00 from china.it does
related to my earning in work.do you think it should be taxed in canada ?
what is the regulation here.can i put it in bank on my acount.

thanks and
best regards


---------------------------------------------------------------------------
david ingram replies:

If the money was earned in China BEFORE you came to Canada, it is not
taxable in Canada if it is $7,000, $70,000 or $700,000.

If it is a gift from parents or an inheritance, it is NOT taxable in Canada
no matter when you received it.

If, you performed a service after you came to Canada for someone in China
and this was payment for services rendered after you came to Canada, then
it is earned income and taxable in Canada. This would be true whether you
had your PR (permanent residence) card yet or not if you were here to stay.

For instance, tonight's national news had the story of the Iranian refugee
who was in sanctuary for three years in St Michel's Church in Vancouver. He
was only granted his PR status today. Any money he earned in that three
years for writing, etc., would be taxable in Canada because he was here more
than 183 days with the intention of staying in Canada.

The same would be true for someone who came to Canada Sept or November, etc.
with the intention of staying here and kept on telecommuting with an old
employer in the US, China, Japan, Greece, etc. Even though they were being
paid in their old country, they would be taxable in Canada because they
earned the money after coming to Canada to live even if they were here less
than 183 days in that particular calendar year. The money would be taxable
in Canada even if it was left in the other country because it was earned
from services performed in Canada.

These rules are also the same for persons who have moved to Australia, New
Zealand, the US, etc.

David,

In the email below you made the statement ...

"If you are a target shooter with guns, for instance,
you will be more comfortable in Detroit."

As a US resident with green card, I have always
thought that until I became a citizen, gun usage and
ownership were illegal.

I personally do not care since I don't have a gun nor
plan to, nor go shooting.

Just a curious question.

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

david ingram replies:


I have always understood that anyone in the US legally can possess a long gun. I have known dozens of Canadians who have taken their guns with them with no problem and do not remember a single individual who was stopped from taking a long gun into the US with his or her settler's effects.

Let me know if you find something that bars you Federally. It is quite possible that an individual state has a citizenship law that I have not heard of but the following two items seem to indicate that green card holders can have a gun at the very least.

United States Code states precisely that the militia is all male citizens and resident aliens at least 17 up to 45 with or without military service experience, and including additionally those under 64 having former military service experience, as well as including female citizens who are members of the National Guard. (Note: previously, only female citizens who were officers of the National Guard were included in this definition; this was changed to include all female citizens in 1993.) [6]. However, this position ignores the fact that this reference to federal entities, specifically the National Guard, does not appear in U.S. Federal Code until 1903[7] and thus cannot be said to be concurrent with the original intent of Second Amendment. Some people argue about even the number of commas in the amendment. Also, there is considerable disagreement about the organized militia and the unorganized militia and their relationship to the Second Amendment. Does the right pertain to only organized, well-regulated militias or all citizens? [8]

Go to http://www.nraila.org/GunLaws/FederalGunLaws.aspx?ID=60

for the federal rules. I will not even attempt to cover the 50 states.



Ineligible Persons

The following classes of people are ineligible to possess, receive, ship, or transport firearms or ammunition:

Those convicted of crimes punishable by imprisonment for over one year, except state misdemeanors punishable by two years or less.
* Fugitives from justice.
* Unlawful users of certain depressant, narcotic, or stimulant drugs.
* Those adjudicated as mental defectives or incompetents or those committed to any mental institution.
* Illegal aliens.
* Citizens who have renounced their citizenship.
* Those persons dishonorably discharged from the Armed Forces.
* Persons less than 18 years of age for the purchase of a shotgun or rifle.
* Persons less than 21 years of age for the purchase of a firearm that is other than a shotgun or rifle.
* Persons subject to a court order that restrains such persons from harassing, stalking, or threatening an intimate partner.
* Persons convicted in any court of a misdemeanor crime of domestic violence.
*
Persons under indictment for a crime punishable by imprisonment for more than one year are ineligible to receive, transport, or ship any firearm or ammunition. Under limited conditions, relief from disability may be obtained from the U.S. Secretary of the Treasury, or through a pardon, expungement, restoration of rights, or setting aside of a conviction.

Acquiring Firearms

The following restrictions apply to firearms acquired through purchase, trade, receipt of gifts, or by other means.

From Dealers

Provided that federal law and the laws of both the dealer's and purchaser's states and localities are complied with:

An individual 21 years of age or older may acquire a handgun from a dealer federally licensed to sell firearms in the individual's state of residence
* An individual 18 years of age or older may purchase a rifle or shotgun from a federally licensed dealer in any state
*
It shall be unlawful for any licensed importer, licensed manufacturer, or licensed dealer to sell, deliver, or transfer a firearm unless the federal firearms licensee receives notice of approval from a prescribed source approving the transfer.

Sale of a firearm by a federally licensed dealer must be documented by a federal form 4473, which identifies and includes other information about the purchaser, and records the make, model, and serial number of the firearm. Sales to an individual of multiple handguns within a five-day period require dealer notification to the Federal Bureau of Alcohol, Tobacco and Firearms. Violations of dealer record keeping requirements are punishable by a penalty of up to $1000 and one year's imprisonment.




In reference
--- US / Canada Income Tax Help - CEN-TAPEDE
<[email protected]> wrote:

> ------------------------------------------> Sent:
Sunday, February 04, 2007 5:08 AM
> To: [email protected]
> Subject: US USA / CANADA Income Tax Help - Escaping
> Canadian Tax
>
>
> Hello,
>
> I saw an answer you posted in December and gather
> you are a
> CAN-US taxation expert. I will have need of such
> expertise when
> I file my 2007 tax return.
>
> I was hoping you could point me in the right
> direction insofar as
> my situation is concerned. I am presently a
> Canadian, in terms
> of citizenship and residency. I have been offered a
> position in
> Detroit with an income of ~$100K USD. I'm also
> planning on
> purchasing a house.
>
> I am considering living in Windsor but working in
> Detroit, to
> benefit from the additional purchasing power of
> making US$ and
> spending CDN$. However, it occurs to me that with
> taxation, I
> may actually be losing big if I do this.
>
> Can you suggest some factors that I should consider
> and resources
> I should consult?
>
> Sincerely,
>
>
---------------------------------------------------------------
> david ingram replies:
>
> The only way for you to decide is to analyse the
> cost of the
> housing, the commute time, the cost of the commute
> and the after
> tax dollar you will receive.
>
> In general if you are married and your spouse does
> not work, your
> tax will be lower in Detroit than Canada because of
> the joint tax
> return.
>
> On the other hand, if you are single and are paying
> cash for your
> house, the difference in your personal income tax
> will not be big
> enough to worry about where you are living because
> of tax. You
> will pick amenities and quality of life. If you are
> a target
> shooter with guns, for instance, you will be more
> comfortable in
> Detroit.
>
> The only way to tell is to prepare pro-forma returns
> showing the
> "what if" of both scenarios.
>
> In the meantime, goto www.centa.com and read the Nov
> 2001
> Newsletter in the top left hand box to get ideas
> about how to
> make your mortgage interest deductible in Canada.
>
> Canadian Tax is not necessarily higher than the US
> anymore. When
> you add ALL the taxes including CPP, EI, Medicare
> and US FICA
> (Social Security) plus State, Federal, and
> Provincial taxes, a
> single person paying rent almost always pays more
> tax in the US
> now.
> -

QUESTION: hi,david

i am immgrant from china,and i brought cash usd7000.00 from china.it does
related to my earning in work.do you think it should be taxed in canada ?
what is the regulation here.can i put it in bank on my acount.

thanks and
best regards


---------------------------------------------------------------------------
david ingram replies:

If the money was earned in China BEFORE you came to Canada, it is not
taxable in Canada if it is $7,000, $70,000 or $700,000.

If it is a gift from parents or an inheritance, it is NOT taxable in Canada
no matter when you received it.

If, you performed a service after you came to Canada for someone in China
and this was payment for services rendered after you came to Canada, then
it is earned income and taxable in Canada. This would be true whether you
had your PR (permanent residence) card yet or not if you were here to stay.

For instance, tonight's national news had the story of the Iranian refugee
who was in sanctuary for three years in St Michel's Church in Vancouver. He
was only granted his PR status today. Any money he earned in that three
years for writing, etc., would be taxable in Canada because he was here more
than 183 days with the intention of staying in Canada.

The same would be true for someone who came to Canada Sept or November, etc.
with the intention of staying here and kept on telecommuting with an old
employer in the US, China, Japan, Greece, etc. Even though they were being
paid in their old country, they would be taxable in Canada because they
earned the money after coming to Canada to live even if they were here less
than 183 days in that particular calendar year. The money would be taxable
in Canada even if it was left in the other country because it was earned
from services performed in Canada.

These rules are also the same for persons who have moved to Australia, New
Zealand, the US, etc.

Hello David,

I am Canadian citizen working in US on TN visa, my family is here with me on TD visa. We have been here for more then a year. We have a house in Ontario that we rent. We have never canceled Canadian driver's license, healthcards, credit cards and bank account however we have obtained US medical, driver's license, etc. We have been visiting Ontario once for a week to do some repaires around house. My wife was not working last year. We filed a 1040 Joint return for the US .

Question: What is the best way to file my Canadian tax? Should we do it jointly or separately? Are we still considered Canadian residents? Should we pay Provincial tax to Ontario or/and Federal Tax or neither one?

Also could you please let me know how much would you charge to prepare my Canadian tax?

Thank you in advance,

---------------------------------------
david ingram replies:

You are a non-resident of Canada although you have kept too many Canadianisms

You need to file two returns. One for any earned income up to the date of departure and the second for the rental on the house after you left. This return is called a Section 216(4) return. Theoretically, the Canadian return has to be prepared BEFORE the US return and to file a Joint return in the US, you would also have to report any earnings from Canada in 2006 for before you moved to the US.

It is very unlikely that the US returns are correct.

Hello

I am a married Indian citizen and am on a H-1 visa. We are planning to buy a
house and my father in law (an Indian also), who stays in Bahrain, wants to
gift us the down payment up to $ 100,000. Is this legal? And if so, am I
liable to be taxed in anyway such as a gift tax? Please advise how do I
proceed on this?

Thanks


--------------------------------
david ingram replies:

If the gift comes from your father-in-law and he is NOT a resident of the
United States or in the United States when he gives it to you, he is NOT
subject to gift tax. However, he should specifically give it to you in
India or Bahrain. You can then transfer it electronically from their to
your account in the US.

If the money was already in the US, the IRS CAN make a claim for gift tax.

To be perfectly safe from "any" possible claim, he can give you and your
wife $12,000 each per year - If there ae children, he can give them $12,000
each. So, He could give your wife and you $24,000 this year and loan you
the $76,000 and then forgive $24,000 a year for three and a 1/3 more years.

OR

He could give you and your wife $24,000 this year and his wife, your
Mother--in-law could give you another $13,000 and forgive another $24,000
next year.

Or if there are 2 children, mom could give you all $12,000 for a total of
$48,000 and he could give you $12,000 each for a total of $48,000 and you
would have $96,000 right now with NO possible tax consequences.

The consequences you DO have to worry about is the fact that you will always
be beholden in a "subtle" if not overt way. You may find that situation
harder to live with in the future. I am dealing with a two country divorce
now where the father in law just could not let the son in law forget that
"the only reason you have this house is that I gave you the down payment."