Page 5 - Lets Talk Winter 2015 | Lipton Chartered Accountants
P. 5
|
Let’s Talk Winter 2015 www.liptonllp.com
Paying US Estate Tax – Upon death, US connection to a foreign country where tax on your Canadian source income.
residents are taxed on the total value of their you will be paying annual income tax. Consideration should be given as to
assets at a tax rate ranging from 18% up to a when Canadian residency ‘ceased’ and
maximum of 40%. However, if the value of Factors that indicate a closer connection the related tax implications of ceasing
your worldwide assets does not exceed $5.34 with Canada include having a permanent residency in Canada.
million in 2014 ($5.43 million in 2015), you home, having family in Canada, banking
II. BUYING, RENTING AND
will generally not be liable for US estate tax in Canada, carrying on business in
SELLING A US VACATION
(with the exception of certain US assets). Canada, having a Canadian driver’s
licence, and voting in Canada.
Jeopardizing Health Coverage in Canada PROPERTY
The IRS recommends that you carry a PURCHASING A VACATION PROPERTY
– In Ontario, you can spend a maximum
of seven months outside the country each photocopy of each year’s completed Form Purchasing US real estate creates a series of
8840 when crossing the border, indicating
year if you wish to maintain your health complex tax issues. To avoid negative tax
coverage. Other provinces have 6 or 7 month that you are re-entering as a temporary implications, it’s important to structure your
requirements to maintain health coverage. visitor from Canada. purchase wisely.
2. File a Treaty-Based US Tax Return – This
WHAT CAN YOU DO? form applies if you have been in the US Personal Ownership
To disclaim potential US residency for tax for more than 182 days in the taxation year. Estate Tax Implications
purposes and avoid paying tax in both If purchasing a US vacation property
The filing deadline is June 15th following
Canada and the United States, you can take the tax year in question. The Canada-US personally with a spouse/other, it is generally
one of the following steps: Tax Treaty stipulates certain ‘tie-breaker’ recommended to avoid ownership in
rules in determining your tax residency. the form of ‘joint tenants with right of
1. File a Closer Connection Form – This survivorship’. Under this type of ownership,
form applies if you have been in the US for a) If you ‘tie-break’ to Canada, you will should a first spouse die and the surviving
less than 182 days in the taxation year and still need to file a US return to report spouse is not a US citizen, even if you are
have not applied for a US green card. IRS all US source income as well as a
resident in Canada, US estate tax will apply
Form 8840 must be filed annually by June treaty exemption form and may also to the full value of the property unless it
15th following the tax year in question. be subject to the US foreign reporting can be proven that each person contributed
requirements for US residents. financially to the purchase. When the second
This form acknowledges that you met or spouse dies, estate tax will be paid again.
exceeded the substantial presence test, but b) If you ‘tie-break’ to the US, you would
are not going to be filing a US tax return pay tax on worldwide income in the US If the ownership is structured as ‘tenants
due to the fact that you maintain a closer and would only be subject to Canadian in common’, upon the death of the first
5
Let’s Talk Winter 2015 www.liptonllp.com
Paying US Estate Tax – Upon death, US connection to a foreign country where tax on your Canadian source income.
residents are taxed on the total value of their you will be paying annual income tax. Consideration should be given as to
assets at a tax rate ranging from 18% up to a when Canadian residency ‘ceased’ and
maximum of 40%. However, if the value of Factors that indicate a closer connection the related tax implications of ceasing
your worldwide assets does not exceed $5.34 with Canada include having a permanent residency in Canada.
million in 2014 ($5.43 million in 2015), you home, having family in Canada, banking
II. BUYING, RENTING AND
will generally not be liable for US estate tax in Canada, carrying on business in
SELLING A US VACATION
(with the exception of certain US assets). Canada, having a Canadian driver’s
licence, and voting in Canada.
Jeopardizing Health Coverage in Canada PROPERTY
The IRS recommends that you carry a PURCHASING A VACATION PROPERTY
– In Ontario, you can spend a maximum
of seven months outside the country each photocopy of each year’s completed Form Purchasing US real estate creates a series of
8840 when crossing the border, indicating
year if you wish to maintain your health complex tax issues. To avoid negative tax
coverage. Other provinces have 6 or 7 month that you are re-entering as a temporary implications, it’s important to structure your
requirements to maintain health coverage. visitor from Canada. purchase wisely.
2. File a Treaty-Based US Tax Return – This
WHAT CAN YOU DO? form applies if you have been in the US Personal Ownership
To disclaim potential US residency for tax for more than 182 days in the taxation year. Estate Tax Implications
purposes and avoid paying tax in both If purchasing a US vacation property
The filing deadline is June 15th following
Canada and the United States, you can take the tax year in question. The Canada-US personally with a spouse/other, it is generally
one of the following steps: Tax Treaty stipulates certain ‘tie-breaker’ recommended to avoid ownership in
rules in determining your tax residency. the form of ‘joint tenants with right of
1. File a Closer Connection Form – This survivorship’. Under this type of ownership,
form applies if you have been in the US for a) If you ‘tie-break’ to Canada, you will should a first spouse die and the surviving
less than 182 days in the taxation year and still need to file a US return to report spouse is not a US citizen, even if you are
have not applied for a US green card. IRS all US source income as well as a
resident in Canada, US estate tax will apply
Form 8840 must be filed annually by June treaty exemption form and may also to the full value of the property unless it
15th following the tax year in question. be subject to the US foreign reporting can be proven that each person contributed
requirements for US residents. financially to the purchase. When the second
This form acknowledges that you met or spouse dies, estate tax will be paid again.
exceeded the substantial presence test, but b) If you ‘tie-break’ to the US, you would
are not going to be filing a US tax return pay tax on worldwide income in the US If the ownership is structured as ‘tenants
due to the fact that you maintain a closer and would only be subject to Canadian in common’, upon the death of the first
5
