Tax planning essential for Canadian owners of U.S. property

  • 2 reading minutes

Author(s): Advo​cateDai​ly​.com staff The fol­low­ing arti­cle first appeared in Advo​cateDai​ly​.com, July 2019.

For Cana­di­ans who own real prop­er­ty in the Unit­ed States, stay­ing proac­tive, com­ply­ing with U.S. tax rules and reg­u­la­tions and stay­ing on top of pre- and post-sale plan­ning are essen­tial to ensure they don’t lose mon­ey on an oth­er­wise poten­tial­ly prof­itable invest­ment, says Oakville-based U.S. tax attor­ney (NY, DC) Alex­ey Man­a­suev. As Man­a­suev, prin­ci­pal of U.S. Tax IQ, tells Advo​cateDai​ly​.com, the first ques­tion Cana­di­an buy­ers need to answer is why they are pur­chas­ing the prop­er­ty — which will help inform how they struc­ture it for tax pur­pos­es. “Before doing any­thing, they have to fig­ure out their game plan. Why do they want to buy that prop­er­ty? Do they want it to stay in the fam­i­ly, or do they plan on hold­ing it for a short peri­od of time, sell­ing the prop­er­ty and buy­ing anoth­er with the gains received on the invest­ment and con­tin­u­ing to grow the invest­ment in that fash­ion? Or they may want to use the prop­er­ty for their vaca­tion or per­son­al use for part of the year, and for the remain­ing time of the year, they may want to rent it out for income,” he says. For exam­ple, he says, for those who plan to use a U.S. real estate for per­son­al pur­pos­es, a cor­po­rate struc­ture for hold­ing the invest­ment is like­ly not a good fit. …

If you put the prop­er­ty in a cor­po­ra­tion or even in a trust, that may well pro­tect you from estate tax lia­bil­i­ty in the future, but that would present sev­er­al issues with your ongo­ing com­pli­ance — includ­ing relat­ed costs as well as poten­tial com­pli­ca­tions.  
Those who put their prop­er­ty — a house or apart­ment, for exam­ple — into a cor­po­ra­tion are required to list the cor­po­ra­tion as the own­er on title and pay rent to it, says Man­a­suev. They are also required to file U.S. tax returns on behalf of the cor­po­ra­tion.

To request full arti­cle please con­tact us Con­tact Us

Recommend