Serbinski Accounting Firms

Ok understandable, thanks for all the advice up to this point; it has been invaluable. Unfortunately the courses did not cover this; this is why I was inquiring about some better courses out there. Just for the record I do not charge anyone for this service. I only offer it to a select few individua...

Ok makes sense. So as suspected, each of these cases I mentioned would likely be considered non-residents then. And of course if you are in the US for less than 6 months on a SERIES of short term contracts over SEVERAL years, you can always file the closer connection exception form even if you meet the SPT over the 3 year rolling “4 monthâ€￾ average (as long as you are never over 183 days in one year; otherwise you will have to rely on the treaty).

Sorry, one last question to get the complete picture. So based on the SPT, what is the best way to handle someone that departed Canada late in the year and didn’t meet the SPT (Say Dec 5th or any time after the 183 day mark for that matter)? You would have no requirement to file a 1040 and report your WORLDWIDE income for the period of Dec 5th to Dec 31st. If I understand some of your other posts on this matter correctly, The IRS says you have to file a dual status (and file as a non-resident for this short period of time and are restricted on some of your exemptions), but have the OPTION to file a full 1040NR or 1040 for the entire year.

If the situation was reversed and I move from the US permanently and arrive in Canada on say December 5th; I file a tax return in Canada as a resident for Dec 5th until Dec 31st and report my worldwide income for this period (even know I’ve only been in Canada for 26 days during the year). I guess it just seems strange to me that I can’t just complete a 1040 for ONLY the period from Dec 5th to Dec 31st like you can on the Canadian side. I assume the reason this works in Canada and not the US is because Canada does not have the SPT or Greencard provision?

For the dual status I just include my US SOURCE income for the period of Dec 5th to Dec 31st on a 1040NR and write dual status at the top, but if I decide to file a full 1040NR or 1040 I have to include my income for the entire year correct (all US SOURCE income for 1040NR and all WORLDWIDE income for 1040)?

From strictly a tax point of view (not taking into consideration the advantages and disadvantages of US reporting requirements etc) if I only have US SOURCE income for the period of Dec 5th to Dec 31st, is there really a difference between the dual status reporting US Source income for the 26 days and electing to file a 1040NR reporting income for the entire year?

Based on some of your other posts on this matter, I know a dual status is rarely the best way to go, but in this case would it really make a difference? I suppose it might make a difference because the dual-status limits some of your exemptions; In which case I would be better off filing a full 1040NR for the entire year because I have no other US SOURCE income from Jan 1st to Dec 4th and would get to use all of the exemptions? Does this sound right?

I took the cross border courses from the Knowledge Bureau over the last 3 years. The company is based out of Winnipeg in Canada. They were just ok… I did learn a lot from them, but I have yet to find a course that REALLY goes into the details (probably because so few people actually understand this stuff). Do you have any suggestions for some better courses, books etc? I’m always looking for any new information I can get.

Agreed, I should definitely start answering a few questions when I feel confident about the subject matter. I’m fairly weak on the US side, but will try to offer some help from time to time on the Canadian side when I feel comfortable answering. I will let you correct me if necessary. Sorry for the long reply, I promise this is my last.

This is tremendous information Nelsona, thank you so much for the great insight! I recently came across a couple from Canada that moved down to the US with their two kids and have been living there for almost three years and are still claiming to be residents of Canada. The individual doing their taxes said that because they only had a temporary 3 year contract to work in the US they can still be considered Canadian residents. They don’t even have a house in Canada. I told them this was likely not true, but they didn’t want to hear it. Sounds like they have been illegally collecting the child tax benefit and universal child care benefit as well.

Just one last question for you if you don’t mind? If I’m the couple mentioned above with a temporarily contract, or even a single person with a temporary contract in the US and a house “available for useâ€￾ back in Canada; in general, in both situations you would still become non-residents of Canada as soon as you move to the US, rent or buy a place and start working correct?

I also see a lot of similar situations when single teachers with do dependants move to China or North Korea to teach for a few years and they all try to maintain their Canadian residency; even know they have no assets that would be deemed to be disposed on departure and Canada has higher tax rates than the country they are moving to. Makes no sense to me, unless I’m overlooking something?

By the way, I have spent hours and hours researching cross border tax matters over the past few years and hands down this is the best place to come to for help. I’ve read hundreds of your posts, many of David Ingram’s posts and have spent time on Gary Gauvin’s and many other websites; but in my opinion you are the most knowledgeable cross border guy out there.

I live in Windsor Ontario Canada in a border town and no one seems to have a clue how to prepare cross border returns properly (aside from maybe one guy- Michael Kennedy; not sure if you have heard of him). I’m an accountant and financial advisor and have been trying to teach myself cross border taxation the last 2-3 years to help some of my clients impacted by this stuff. I’ve now taken 3 cross border courses, have read many books and of course searched all over the internet. I hope you don’t mind me coming to you for advice from time to time. I will only come to you when I’m absolutely stuck; I try to find answers to everything myself first.

In any event, thanks again and have a great night. Sorry for the rambling.

This is extremely helpful, thank you so much Nelsona; you explained this extremely well!

I guess my only follow-up question is what would happen if it takes considerably longer to sell the house than planned? Like a year or even longer? Would he still be able to maintain his residency status in Canada during this period? I suppose as long as he continues to come back to Canada to visit his wife and child on a regular basis he might be able to? I also suppose his ability to maintain his Canadian residency would be strengthened if he had a specific contract with his US employer that said he was only under contract for “xâ€￾ number of days; or would this even help him?

Does CRA have a certain time limit or rule of thumb they use in this type of situation; like number of days you are out of the country before they force you to be a non-resident?

I know none of this is a science and in the rare circumstance that CRA decided to challenge any of this in court, they would consider all of the factors and any two judges may come up with completely opposite decisions. I guess I was just looking for a rule of thumb if one even exists.

I have a question about determining residency for spouses with differing departure dates. Both are Canadian citizens and have been residents of Canada their entire life. The husband just got a job in the US and will be moving there permanently in March. His wife and young child will be staying behin...

Hi Nelsona, I just have a quick follow-up question on the private shares. Because the shares will be deemed to be disposed, I suppose this means I will have to get a professional valuation of the shares to determine the gain/loss. From what I have read this is a fairly expensive process. Is there an...

Ok thanks so much Nelsona, this was my understanding as well. I just got confused after reading the post from JGCA. It just didn't make any sense to me and thought I should investigate this further. Sorry about the link, here it is again. http://forums.serbinski.com/viewtopic.php?t=8849&highligh...

I did some significant research on this previously and know with certainly that private shares are now deemed to be disposed on departure and this is generally your final tax obligation to Canada (aside from a few exceptions). In other words, after departure they generally become taxable based on residency; just like normal public shares, Canada Pension Plan, US Social Security, etc.

If you can now receive the bump-up to the ACB under the new XIII.7, I don’t see much of a downside using the exemption, provided the Alt Min Tax is not larger than the actual tax on the deemed disposition (which I assume would be rare). Like you, I always thought there must be a way to bump-up the ACB on the US side via treaty, but then I read JGCA’s post below and he seems to think you can’t; unless I’m interpreting it incorrectly? The post is relatively recent from 2014.

http://forums.serbinski.com/viewtopic.p ... ll&start=0

The part I’m confused about is where he says they are deemed to be sold on departure (which I agree with), but then he says the following “You could elect to however the deemed proceeds to occur and them claim your small business capital gain exemption on this sale so it would be tax free as long as its under $ 750K and it meet the qualifying requirements. The advantage is no tax ( but may have sizabale AMT tax owing in Canada of which you will not get back as a non resident) but you get no step up in the US on this and you use up the exemptipn in Canada so it has no relief to you in the US.â€￾

His wording is a bit poor when he mentions the part about an election. It’s almost as if he contradicts himself. First he says they are deemed to be disposed, but then in the next paragraph he mentions the election.

This post is about the Lifetime Capital Gains Exemption in the year of departure from Canada. If you have private shares on departure they are deemed to be disposed, but you can use the exemption to eliminate some or all of the tax on the Canadian side. If you sold these shares in normal circumstanc...

Ok great, thanks so much for the quick response!

If I’m a Canadian citizen and resident of Canada with an IRA in the US (Age 75 taking equal periodic monthly withdrawals) and completed form W-8BEN to reduce the withholding tax to the 15% treaty rate; do you still have to file a US 1040NR tax return every year? This is my only US income. It would...

Ok thanks for the additional info, this is helpful!

Ok thanks again, I will be mindful of this form when I file. Now that I'm thinking about this some more, it likely doesn't make sense to make any RRSP contributions while living in Canada and working in the US does it? I assume I wouldn't be able to deduct them on the US side and would have the fore...

Ok thanks for confirming. Currently in Canada and don't have either a 401K or ROTH 401K. US Employer just gave the option of which one I want, so I'm really glad I checked here first. Was only asking about the ROTH 401K because there is a possibility that I will move to the US at some point and then...

Thanks for pointing me in the right direct. I found this archived on CRA's website: "This means that individuals are exempt from taxation on accrued income and distributions from a Roth IRA, provided that a valid Election is filed, a Canadian Contribution is not made, and distributions would no...