On Cdn spousal 1040NR tax returns to report 50-50 ownership in US (vacation house or condo that isn't taxpayers' residence) rental property income with a past tax election to treat the rental income as income which is effectively connected with the conduct of a trade or business (TOB) within the United States:
Is it correct for taxpayer to concurrently take the reporting position:
1) In year of property sale that it was a capital asset not used in business and that said tax election only deemed it a connected TOB, but that's a tax-world anomaly and that in real life it's an investment of the Cdn owners and thus a capital asset and eligible for cap gain rates on sale?
2) the US rental property activity does not rise to the level of a business for tax definition purposes, and for this (and other reasons) the taxpayers were not deemed to be classified and required to report as a partnership (which, in other contexts, could be deemed to spouses conducting joint business regardless that they never have legally formed a partnership in any state)
3)The rental management company issues them 1042-S and not 1099-MISC. A 1099 form is used to report gross rent for US businesses. US Treasury Regulation § 1.1461-1(c)(2) Amounts subject to reporting include, but are not limited to, the following items—
(C) Rents;
(J) Amounts that are (or are presumed to be) effectively connected with the conduct of a trade or business in the United States
871 d rental property election - play both fence sides?
Moderator: Mark T Serbinski CA CPA