Can you handle one more question about Canadians residing in the US who hold RRSPs??

Thanks to your info, I have been filing form TDF 90-22.1 and 8891 since 2002. On form 8891, I made the election to defer income in 2002 and have been declaring the current December 31 year-end value on that form every year since 2002. I thought I had it figured out but now I'm reading all the other questions from your other readers and I guess it's tax time so I have to freak out just a little. My RRSPs have gained value since I've been here, but I thought as long as the earnings stay within the RRSP and I am not withdrawing any, all I need to do is declare the year-end value on the 8891 and the TDF 90-22.1 ??

Just double-checking. Thanks. One day I will have to think about how to report and take some of that money as income, but not this year!

Thank you.
------------------------------------------------
david ingram replies:

The internal undistributed earnings of the RRSP must be reported on the 8891 on line 10 - a - b - c - d - and e

However, the form is poorly written and tells you to put the income on Schedule B. If you stop there, you end up paying tax on the money because the form does not tell you how to take it off. What you do is put it on and deduct it immediately (per line 6 form 8891).

In the last couple of years, the gain has been mostly from exchange rates.

I put the difference between Dec 31 of last year and Dec 31st of the current year on line a0 with the following statement written in the explanation space, "A combination of internal earnings and changes in exchange rates have resulted in a paper profit (or loss) of $XXX,XX

My question is: Canadian-specific

QUESTION:
What date is the archive in Centa peed for turning home mortgage interest
tax deductable
There was a book written about it also Who was the author?

Thanks I very much enjoy you column

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

The first treatise on making mortgage interest deductible ever written was
in the North Shore News in November 1976 and has been updated many times.
You can read the latest version in the Nov 2001 Newsletter in the top left
hand box at www.centa.com.

Fraser Smith wrote a book called the SMITH MANOEUVRE in 1985. It should be
available at any book store or you can check out his website at
http://www.smithman.net/frasersmith.html

If you are in Greater Vancouver, you can attend one of Fred Snyder's Free
Thursday Seminars and /or listen to him every Sunday Morning at 9:00 AM on
www.600am.com or see him at 10:30 AM every Sunday morning on NOW TV, channel
10.

If you are on the island, Fred's associate, Ralph Hahmann also gives free
seminars on the subject at his Dundee Wealth Management office on McKenzie
Street in Victoria on Tuesday evenings. Call Ralph at (250) 472-0700.

Every Thursday Evening, Fred Snyder of Dundee Wealth Management conducts one
of 17 different financial seminars in the boardroom of his office

Time: 7:00 to 9:30 PM
Date: Every Thursday evening
Place 1764 West Seventh
Vancouver (corner of Burrard)

Phone (604) 731-8900 to register

No cost - no obligation

Topics always cover mortgage interest as a deduction

other topics - getting the mortgage, estate planning, critical care
insurance, income taxation, differences between stocks and bonds, and
usually the most innovative HELOC mortgage offered in Canada from Manulife
Bank

If you are starting in downtown Vancouver and do not want to go home first,
one of the excellent THAI HOUSE restaurants is in the same building and
makes a nice start to the evening. If it is your first seminar, Fred will
buy you dinner if you are pre-registered.

I, david ingram, am sometimes at the Thursday evening following the last
Sunday of each month to cover mortgage interest as a deduction and give the
class an adding test.

David:


Great response encouraging this First Nations individual to work on the Harper government to afford the same courtesy to American First Nations :>)



Along a similar vein, if I retire to BC and track 183 nights/year, but keep a home in Seattle that I rent out, will I be eligible for BC Medical? I am a dual citizen.



Most appreciatively.




david ingram replies:

If you are sleeping in BC more than 183 days a night with a home here and are here legally as an immigrant or with a working visa or as a Canadian citizen, you must join BC Medical, have a BC Driver's Licence and pay tax to Canada on your World Income which would include US Social Security interest, dividends, rent on the US property, alimony, etc.

Background:

History:
-We purchased an acreage for my mom. in July 2000.
-We moved a house on to the property and completed it for her to live in
over the next 6 months.
-My mom moved into the house in 2001.

Situation:
-We did not purchase the property as an investment, we purchased it as her
principal residence as she had lost her previous residence when a
relationship she was in turned sour.
-Mom has paid all taxes, all bills for the entire time she has been in the
house and will until she dies or decides to sell and uses the proceeds to
purchase something more suitable later in life.
-We put all 3 names on the title in recognition that mom has not been the
best with managing her finances, and relationships so it was also meant to
protect her from herself. It is also meant to streamline probate, and
estate issues when she does die.

-Last year we purchased an investment property and my mother signed for the
mortgage. In effect she gave us a loan (against her house) for the purpose
of the investment, equivalent to the bank's mortgage rate.


Tax Questions:

-What is required to sustantiate mom's claim of this being her personal
residence when it does come time to sell or she dies? Although we are
legally on title, she is definitely the beneficial owner of the property.
What if anything is required to support this.
-If this is not supportable, what would be the best way to minimize tax
exposure when we have to purchase a new home for her?
-Would a signed document indicating that mom was the majority owner of the
property be sufficient. If so is there a minimum amount that we can be
designated to own vs her (ie we each own 5%, vs 90% for her?)

-Are there special issues that arise out of mortgaging mom's place to
finance our investment property (we all signed the mortgage papers)? If so
should we have a signed agreement that documents the transaction, with mom
being the intermediary in the transaction (do I need to do this before I
file my taxes).
deb
(I was unable to figure out how to search the archives. If you can't
address this question as part of your newsletter, I would like to be given
an estimate for what you would charge me for a paid consultation on this
issue.

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

I hate to say it but you should have a consultation either in person or by
conference call with mom so that everyone has their ducks in order.

If mom has made all payments on the house, it is likely hers under what is
called a constructive trust. I will let you google "Constructive Trust" for
several examples.

as for charges,

Phone consultations are $400 for 15 minutes to 50 minutes (professional
hour). Please note that GST is added if product remains in Canada or a phone
consultation is in Canada.

This is not intended to be definitive but in general I am quoting $800 to
$2,400 for a dual country tax return.

$800 would be one T4 slip one W2 slip one or two interest slips and you
lived in one country only - no self employment or rentals or capital gains -
you did not move into or out of the country in this year.

$1,000 would be the same with one rental

$1,200 would be the same with one business no rental

$1,200 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.

$1,500 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

$2,400 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 $150.00 up.

With a Rental for $350

A Business for $350 - Rental and business likely $450

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 $800 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.

Just a guideline not etched in stone.

QUESTION:

SIR,

I AM A US CITIZEN CURRENTLY EMPLOYED FOR THE US GOVERNMENT AND HAVE BEEN ASSIGNED TEMPORARLY IN CANADA UNDER THE PRECLEARANCE ACT OF 1972. I AM WORKING AS A PRECLEARANCE OFFICER ON A WORK AUTHORIZATION FOR A FOREIGN GOVERNMENT.

THE US GOVERNMENT PROVIDES ITS EMPLOYEE WITH A FOREIGN LIVING QUARTERS ALLOWANCE WHICH IS NON-TAXABLE.

I RESIDE IN A HOME WHICH I PURCHASED IN CANADA.

MY QUESTION IS? AFTER MY TOUR ENDS AM I SUBJECT TO CAPITAL GAINS IN BOTH COUNTRIES.

I PAY TAX IN THE US.

THANK YOU,
-----------------------------------------------
david ingram replies:

Your earnings or wages are tax free in Canada under Article XIX of the US / Canada Income Tax Convention (Treaty). However, you are a legal resident of Canada and can apply for an receive provincial medical benefits, your kids can go to school and everything is the same as for a Canadian citizen or PR (permanent resident).

You should file an annual Canadian Income Tax return and report the US income on line 104 of the Canadian return and then deduct every cent on line 256 under Article XIX of the Tax Treaty.

As a resident of Canada, any profit on your personal home is tax free.

As a US citizen, you are allowed up to $250,000 US profit per person if you have lived in the house for 24 out of the last 60 months.

The following older Q & A may give you some other ideas.

My_question_is: Applicable to both US and Canada
Subject: Canadian Government Employee living in US, working in Canada
Expert: [email protected]
Date: Tuesday January 30, 2007
Time: 03:11 PM -0500

QUESTION:

I am a Canadian government employee who works in Canada. I am applying for permanent resident status in the US, and will be moving there shortly. I was wondering what me tax obligations would be to either countries. I was told that as a government employee, I would not have to pay the US tax since my income comes from the Canadian government and the US has a tax treaty with Canada stating that each other cannot collect tax from the governments of the other country. I would like to know all the information before I make my move. I do not own any property or investments in Canada, but I plan on keeping a Canadian bank account, as that is where my paycheque will go. I will have to cancel my health insurance and transfer my car over. Thanks you for any help on the situation.

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

Article XIX of the US/Canada Income Tax Treaty exempts an employee of the Canadian Federal Government from paying tax to the US government on their government paycheque when the Canadian lives in the US for any reason and the same situation applies in reverse.

For instance, a female US citizen working as a US border guard and living in Canada with her Canadian husband and three Canadian born children does NOT pay one cent of tax to Canada on her US Homeland Security income. She qualifies for BC Medical and will even qualify for a Canadian old age pension at 65 but does not pay tax on her US government income. However, any interest, dividends, capital gains or rentals or author's royalties ARE taxed by Canada.
---------------------
This is the actual treaty article

Article XIX
Government Service
Remuneration, other than a pension, paid by a Contracting State or a political subdivision or local authority thereof to a citizen of that State in respect of services rendered in the discharge of functions of a governmental nature shall be taxable only in that State. However, the provisions of Article XIV (Independent Personal Services), XV (Dependent Personal Services) or XVI (Artistes and Athletes), as the case may be, shall apply, and the preceding sentence shall not apply, to remuneration paid in respect of services rendered in connection with a trade or business carried on by a Contracting State or a political subdivision or local authority thereof

QUESTION: I am a Canadian Citizen (born in Canada) - last year, my husband
took a job in the US on a TN visa (therefore, I received a TD). Because I
could not work in the US under a TD Visa, I continued to do consulting work
in Canada using our address in Canada. I physically was in the US for the
almost the entire calendar year in 2006. What are my tax implications of
doing so? Do I pay taxes in Canada (FYI, I did have a GST number and paid
GST), or should I be paying taxes in the US as I was not in Canada.

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

Assuming that you did the work from the US, you have no tax liability in
Canada.

You should file your joint US return with your husband and include a
schedule C showing your income earned in the US.

On the other hand if you were up in Canada every two weeks for a day and
worked out of a house you still own in Canada, you would owe tax on some of
it to Canada first and the rest to the US first.

If the home in Canada was rented out to strangers and it was just a mailing
address, then you still just pay income tax to the US on the self
employment. (You do have to file a section 216(4) return to report the
rental income).

On the other hand, your GST return is different. If you were registered to
supply services in Canada and collected GST from your Canadian clients, that
was proper and you would file the GST and pay the collected GST to the CRA.
Because your expenses were all in the USA, you will have very little (if
any) input credits.

We, of course would be happy to look after these returns for you.

QUESTION:

The whole concept of Locked-in RRSPs is unbelievable. Here we are all Canadians and should have the same rights, whomever we worked for, what Province we live(d) in, or which Jurisdiction our Pension falls under. Not true. There doesn't seem to be a place to go to find information on this, to correct this, or to discuss this. I just set up a Yahoo group if that can be of help: ca.groups.yahoo.com/group/Locked-in_RRSP. It needs publication. Can you help? It will be an open membership until such time that people try to take it over for spam.
A question I would have, is can a non-Canadian have a locked-in RRSP. My wife is not Canadian so what would happen if I died? I live in the Philippines (and am Canadian).
----------------------------------
david ingram replies:

Depending upon what province you moved from, you can likely unlock your RRSP and withdraw it. Read these other two answers:
------------------------------------------

My question is: Applicable to both US and Canada

QUESTION: I am a permanent Resident in the United States. I have a locked in
RRSP of about $500,000 CDN and am 56 years of age.

When will I be able to liquidate the RRSP and what tax will be due and to
which country. My full employment income is US based and all taxes due are to
the US government.

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

A locked in RRSP can NOT be rolled into a RRIF. It can be rolled into a
lifetime annuity or a LIF (Life Income Fund) or a LRIF (Locked-in Retirement
Income Fund). If your LIF was from Ontario, Alberta or BC or a federal
pension (CN Railroad for instance) a LIF requires you to purchase a life
annuity by age 80, an LRIF does not, leaving you more control over your
money,

If you do the annuity route, Canada will get 15% tax under Article XVIII of
the US Canada Income Tax Treaty. You will then report the income again on
your US return and claim the 15% tax paid to Canada on US form 1116 under
the "other" classification.

BC and Alberta and I think Ontario will allow you to withdraw your RRSP if
you become a non-resident of Canada.
Those rules can be found in this older CEN-TAPEDE

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

QUESTION:

I am a Canadian citizen currently resident of Washington state, USA. I
have a locked-in RRSP in TD Canada Trust in Alberta. I would like to un-lock
the RRSP for the purpose of purchasing a home here. The bank suggested
contacting the government and asking for permission, but could give me no
other contact information or advice. Is it possible to make this
transaction, and how would I go about it?

Thank-you

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

You are in luck. Alberta is one of three jurisdictions which allow the
unlocking g of a locked in plan when you become a non-resident of Canada.
However, I have never been involved in an Alberta locked-In plan withdrawal.

In BC, you must be gone for more than two years and write the Superintendent
of Financial Institutions for written permission to withdraw the money. The
superintendent writes the letter to you, you take it to the Financial
Institution which withholds 25% tax and gives you the rest. A letter from
the CRA will also help.


Alberta's rules allow for the withdrawal as soon as you have become a
non-resident. You need a letter from the CRA acknowledging that you are a
non-resident. Take it to the TD - Canada Trust Branch along with a copy of

http://www.finance.gov.ab.ca/publications/pensions/pdf/info_accessing_pensio
n_funds.pdf#search='unlocking%20rrsp%20non%20resident%20alberta'

And you should get your money less a 25% withholding tax.

Let me know what happens.
-------------------------
We will help prepare your federal and state income tax return or provincial
returns. We do no online filing but will file the returns so that you can
check the status online. We will do the 1040 or 1040NR or 1040X pr 1041
estate return, your Canadian T1 and in a pinch can help you look after a
Mexican return as well with our Guadalajara consultant, David Holroyd.

Whether it is help with specific or general information, filing, or just an
estimate of the tax you will owe in a specific situation, we can calculate
it for you. We can be the estimator for the tax equalization if you are
being transferred from state to state or country to country.

Our help is NOT free however. Typically, we charge $400 Cdn per hour for
calculating, preparing or consultation service or services. We specialize in
old returns so if you have not filed because of a bankruptcy or
procrastination, we regularly do 10 years back for US / Canada citizens
where the US citizen has failed to file while living in Canada. We can look
after the TDF-90 and form 8891 RRSP reporting forms as well.

My_question_is: Applicable to both US and Canada
Subject: flight attendant based in Vancouver wishing to commute to
Seattle.
Expert: [email protected]
Date: Tuesday February 28, 2006
Time: 03:52 PM -0800

QUESTION:

Hello,
My boyfriend is Canadian, owns a green card, works out of Seattle. I'd like
to continue working out of Vancouver as a flight attendant, and make Seattle
"my home" in order to live with him... I understand that unless I have an
immigrant status I cannot do this i.e green card. We are not thinking of
marriage just yet...I also have French citizenship, are the rules different?
What should I do? At this stage I understand that with my canadian passport
I must give proof of permanent residency in Canada. To what extend? And, how
many times a week, month, would I be able to cross the border? Any limits?
How long could my stay in the US be at a time?
What rights do I have as a visitor while in the US.
Thank you for your time.
A.M

=================

I am going to put two former newsletters here. If you really want advice,
you should come and see me on one of your trips to Vancouver. Preferably,
you would have your US friend with you at that time. Note that I charge
$428 Cdn for this type of Consultation.

You can NOT visit your friend in Seattle unless you have a full blown
residence in Canada. That could be something you share with someone else
but it should have the rent, phone and hydro in your name or joint names.
---------------------------------------
- examples follow -

Dear David Ingram,

I work for an aviation consulting firm in Washington D.C. that is working
for a group of approximately 90 U.S. resident Air Canada pilots. These
pilots are unhappy because Canada recently changed the way that it taxed
their income from international flights.

Before, their income from domestic flights was completely taxable in Canada
and their income from international flights was not taxable in Canada. Now
the domestic taxation remains the same, but the income for international
flights is now taxed in Canada for the portion of time that the flight is
over Canadian airspace.

Do you know how the United States treats a parallel situation where a
Canadian resident works for a U.S. airline?

==========================================
david ingram replies:

I have been doing these returns for pilots and air crew since 1969 and
Canada has always taxed the domestic portion of an international flight.

The change which was started six years ago and went back to 1995 returns
was more one of enforcement of detail than it was one of a change in the
law. I know this to be factual because the tax change for our clients
rarely exceeded $800 and one even got a small refund.

On the other hand other pilots were coming in with reassessments which went
from $20,000 to $100,000 because their accountants had been very aggressive.

And to justify the "pogram" run by the CCRA, they managed to find many, many
air crew who were not "really" living in the states or more often, not
really living in Costa Rica or other tax haven country.

The real beneficiaries of the audits which involved over 270 Air Canada
Personnel and over 170 Canadian Airlines Personnel (Before the merger) were
the provinces. With the audit, the CCRA insisted that provincial credits be
given.

This meant that if a pilot left Vancouver and flew to Calgary, one half of
the flight was credit to BC and the other half to Alberta. When he (or she)
took off from Alberta and landed in Winnipeg, Manitoba got credit for half
the flight and Alberta got the other half. When flying from Winnipeg to
Toronto, Ontario got half and Manitoba got half. If the pilot then flew to
Chicago, about 6% of the flight was credited to Ontario and the rest was
international and not taxable in Canada. When the pilot leaves Chicago for
Calgary, Alberta gets 5% and the other 95% is international. Leaving
Calgary to return to Vancouver would be divided between Alberta and British
Columbia. The pilot (or flight attendant or Purser) has to file a
multi-jurisdictional tax return.

On the other hand, a pilot who regularly flies Vancouver <> Hawaii or
Toronto <> Miami and does no domestic flights will only pay tax to Canada on
about 5 to 8% of their earnings. If they are a resident of the US, All of
it is taxable to the US and he or she would get a dollar for dollar foreign
tax credit for the tax paid to Canada.

When these pilots or other air crew are re-assessed by Canada and have to
pay more, it will just increase the foreign tax credit to the US. AND, AND,
AND there is no three year limitation on claiming the foreign tax credit on
the US return. The US / Canada Tax treaty takes this type of "other
country" re-assessments into account and allows a change up to ten years.

Over the years, I have only had a handful of Canadian Residents who were
working for US Airlines while continuing to live in Canada. Every one was a
US citizen and US citizens are taxed on their world income no matter where
they live. When paid by the US Airline, they are paying full taxes to the
US first. Since no US airline is involved in the cross Canada transport of
passengers, the same set of facts does not arise.

Most US airlines (other than Air Alaska) only have a short part of any
flight over Canadian Air Space as they land. The Canadian resident pays full
tax to the US on all their earnings and then reports the earnings again in
Canada and claims a foreign tax credit for the Federal Taxes, Medicare and
Social Security paid to the US. The Canadian resident does not get credit
for the 401(K) deduction and ends up paying tax on this twice. Once now to
Canada and then again when they withdraw it as a pension in the future
(which has already come and gone for many retirees).

You are also welcome to forward this to your pilots.

<www.david-ingram.com">www.david-ingram.com/">http://www.david-ingram.com/>;

-----------------------
The next question involves the crew member of a ship but the same rules
apply.

In particular, pay attention to the Border Kit description
---------------



QUESTION:

I am a Canadian Crew member onboard passenger Cruise Ships who was denied
access in to the States a year ago. It was based on the official not
believing I had sufficient ties to Canada. I presented all documentation 2
days later and was granted access to Miami for a vacation. I have not been
turned away since but I do have to go through extensive questioning each
time I travel to or through the US. Most recently I was held up in Huston
coming home from Mexico and almost missed my connecting flight to Canada.
Is there anything I can do to stop this from happening? I travel for work
quite often and it is very stressful. I'm frightened that I'll get someone
having a bad day again and get bared forever ending my career.
================================
david ingram replies;

EVERYONE who travels through the US border on a regular basis and is time
sensitive in that they HAVE TO make a meeting, catch a ship, catch a plane,
etc, needs a BORDER KIT.

What is a Border Kit?

It is a 1/2 inch three ring binder which contains:

1. a copy of your last three years of Canadian Income Tax returns or US
returns if vice versa)

2. a letter form your employer showing who you work for, where you are paid
from, what your duties are and if possible an itinerary.

3. A copy of your Canadian lease or rental or ownership agreement for your
Canadian home.

4. A copy of your Canadian phone bill.

5. A copy of your Canadian Utility bill

6. A copy of your Canadian cable vision bill

7. A copy of your passport

8. A copy of your birth certificate

9. a Copy of your Provincial Driver's licence

10. A copy of your Provincial medical card.

11. a copy of any club or other organization memberships you have

12 a copy of your Canadian credit cards

13. A copy of your local library card

14. A copy of your local video rental card

And anything else that seems relevent.

WARNING!

If you do not have 2, 4 and 5 because you do not have a HOME in Canada, you
do not have a legal right to enter the USA as a visitor.

Cruise ship people have a bad habit of not filing their tax returns and many
just stay with parents, friends, ex lovers or current lovers when they come
back to Canada. If this is your situation, you need to establish those
roots. Get a phone bill at your parents' house, get the Utility bill in
your name, etc. Pay rent to someone!

My_question_is: Canadian-specific
Subject: poker winnings
Expert: [email protected]
Date: Sunday February 11, 2007
Time: 06:25 PM -0500

QUESTION:

Dear David: This is reguarding playing poker. I'm up about 50K (cash)plus in
the pass three years playing poker. I haven't claim or files my taxes for
the pass 3 years, should i claim this money so i can put it in the bank and
use it for real estate investments.Otherwise i cannot put the funds in cause
i dont have a real job.I really dont mind paying taxes on it cause i dont
want to have issues with revenue Canada. This way i can deposit the funds
into the bank and do the deductible intrest investments.

Thank You in advance David

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

I do a lot of US gambling returns and the odd Canadian return

In 2003 I did a 2002 return for a gent who wanted to report his earnings for
much the same reason you do. I said it was not taxable and he wanted to pay
anyway. We sent a cheque for about $25,000 to pay the tax on his skilful
playing.

The CRA sent the cheque back with the admonition (as if I did not know) that
gambling was not taxable in Canada.

If you want to report it, put it in on line 130 and take it off on line 256.
You have filed a tax return. That way you have given them the chance to see
the money and have something to show the mortgage company.