Good Morning,
I am a Canadian citizen on a J2 visa. I work and live in Canada and visit my wife (J1) and kids in the U.S during the weekends. I am exempt from the SPT for 2010 and 2011.
I have been told that if one spends more than 183 days in the u.s in a certain year there is a 30% flat tax on [b]u.s source capital gains.[/b]
My understanding is that this bears no relation to the 183 SPT test.
1. I was wondering if anyone knows what the IRS considers as "[b]U.S source [/b]capital gains" ?
Will I have to file a 1040NR and report all my capital gains worldwide?
I would like to avoid filing a federal U.S return in order to avoid paying local state and county taxes in addition to the provincial taxes I am paying in Canada.
[url]http://www.irs.gov/businesses/small/int ... 53,00.html[/url]
Thanks
U.S taxation of capital gains
Moderator: Mark T Serbinski CA CPA
This is incorrect.
As long as you are on J class, and thus non-resident of US, you remain Cdn resident, and thus the treaty rules about cap gains apply: The only US-sourced cap gains you would need to report are real estate and resource related. All other cap gains, regardless of where the investement account is situated, remain Cdn-sourced.
As long as you are on J class, and thus non-resident of US, you remain Cdn resident, and thus the treaty rules about cap gains apply: The only US-sourced cap gains you would need to report are real estate and resource related. All other cap gains, regardless of where the investement account is situated, remain Cdn-sourced.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Thata said, just because you are non-resident of US does Not mean that you don't report a US tax return. Your US wages, for example, would be reported on 1040NR, and would be taxable state and locally.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Just to make sure i fully understood:
The first two years on J Visa will classify me as a non resident of US.
However the IRS link I attached claims that the capital gains rule is regardless of the SPT rules and exempt status.
[[url]url]http://www.irs.gov/businesses/small/int ... 53,00.html[/url] [/url]
I understand that the tax treaty will reduce the capital gain tax to ZERO if reported.
I am a little confused if it actually needs to be reported.
Thanks again.
The first two years on J Visa will classify me as a non resident of US.
However the IRS link I attached claims that the capital gains rule is regardless of the SPT rules and exempt status.
[[url]url]http://www.irs.gov/businesses/small/int ... 53,00.html[/url] [/url]
I understand that the tax treaty will reduce the capital gain tax to ZERO if reported.
I am a little confused if it actually needs to be reported.
Thanks again.
First, remember that IRS does typically take into consideration treaties when outlining its regulations (or it will say so).
As the atricle brought out, the SOURCE of the cap gains is what makes it taxable. The treaty defines the source of cap gains for Cdn residents (and you do indeed remain a CDn resident throughout this period) as Cdn-sourced, unless they are specifically real estate based by article XIII.By Article XXIV(3).a, only income earned by Cdn resident that can be taxed by US according to the treaty (not its regs) is then considered US-sourced. All other is considered Cdn-sourced.
To clarify your statement that the "treaty will reduce the capital gain tax to ZERO if reported", the treaty does not set out cap gains tax rates, but rather defines what can be taxed.
In my opinion, none of your cap gains are US-sourced, thus they do not need to be reprted at all on your 1040NR.
As the atricle brought out, the SOURCE of the cap gains is what makes it taxable. The treaty defines the source of cap gains for Cdn residents (and you do indeed remain a CDn resident throughout this period) as Cdn-sourced, unless they are specifically real estate based by article XIII.By Article XXIV(3).a, only income earned by Cdn resident that can be taxed by US according to the treaty (not its regs) is then considered US-sourced. All other is considered Cdn-sourced.
To clarify your statement that the "treaty will reduce the capital gain tax to ZERO if reported", the treaty does not set out cap gains tax rates, but rather defines what can be taxed.
In my opinion, none of your cap gains are US-sourced, thus they do not need to be reprted at all on your 1040NR.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best