Dual citizen living in USA since 1994,purchased Canada farm

Slong · Post by **Slong** » Thu Feb 02, 2012 10:50 pm

After obtaining non-resident Business Number from Canada Revenue, I purchased farmland in 2011 and leased the same to local farmers in Ontario. Business Number was obtained for GST/HST with me as sole proprietor. I collected GST/HST from tenants and paid to Canada Revenue. My question is what are my obligations for income tax compliance in Canada and USA. I am very likely to sell my land in a couple of years. Are there any forms to file in Canada now to avoid problems in the future?

JGCA · Post by **JGCA** » Thu Feb 02, 2012 11:19 pm

Sure you have received rental income as a non resident you have to file a CND tax return reporting teh income after expenses and tehn file tehis also in the US with a FTC on tax paid in Canada. In addition you were supose to remitt non resident witholding tax to CRA on this income and remit it monthly ( Or at least the tenant was on your behalf) file an Nr$ for 2012 on teh net rental income basis to avoid gross revenue witholding base thius way you can reduce teh witolding tax, I have written on this before see my prior posts for all details on rates etc.

Slong · Post by **Slong** » Fri Feb 03, 2012 1:25 pm

Thank you for your reply...
I am sorry that I have few more questions. Please help me...

1) You said in your reply "file this also in the US with a FTC on tax paid in Canada" .
What is FTC? Can you please elaborate this..

2) As I mentioned that I received a GST/HST registration number for conducting business in Canada. Does this number has no use other than collecting GST/HST for the government?

3) My farm tenants have not withheld any income tax. As you know, it is not monthly payments like for a building. They paid me in two equal installments. What are the consequences for tenants and for me as no tax was withheld? What is the immediate action that I must take to correct this situation?

JGCA · Post by **JGCA** » Fri Feb 03, 2012 2:48 pm

FTC is foreign tax credit. It does not matter if they pay monthly or annually or otherwise the tax is due 15 days after the end of the month in which it was paid and its 25% of the gross rent. Since you did not do this in 2011 make sure you do it in 2012 get NR tax witholding numbers from Rev Canada. To correct this for 2011 you need to file a Canadian Sec 216 tax return showing the rents and expenses paid you pay tax on teh net amount but they will assess interest and penalties for not sending the tax on time it should not be too bad.

You can get the tennant or even yourself to send in the witholding tax for 2012 then again at end of 2012 file a Sec 216 tax return in Canada then claim this tax against your US tax return, the cost of doing a CND tax return at year end should not be more than $1000 if it is theu are ripping you off I charge about that.

Slong · Post by **Slong** » Fri Feb 03, 2012 5:49 pm

Thanks a lot again....

I am amazed at all rules and filing requirements. :(

blairgoates · Post by **blairgoates** » Sat Feb 04, 2012 1:12 am

When you sell the farm property it will most likely be exempt from capital gains tax in Canada but not in the US.

JGCA · Post by **JGCA** » Sat Feb 04, 2012 10:26 am

IN Canada it may or may b=not be subject to cap gains depends on how they treat the farming operations as full time or hobby so its not automatic it depends.

JGCA · Post by **JGCA** » Sat Feb 04, 2012 10:30 am

Also remember Slong that the rentasl income from Canada is reportable by you in the US Federally but not to Michigan since Michigan does not tax rental income out of state.

Slong · Post by **Slong** » Sat Feb 04, 2012 12:08 pm

Being a non-resident, do I need to report to Canada that I purchased a farm?
My concern is that if I don't report my purchase now, I may face problems later. Do reporting rules change if a non-resident purchases a farm (or real property) jointly with spouse (or another person)?
As a dual citizen, I thought I had the right to buy. My Canadian lawyer also never mentioned to me that I report my farm purchase to any authority. I am writing all this now because I feel Canada has lot more compliance and taxation rules than I imagined. I regret my farm purchase, which was my childhood dream.

JGCA · Post by **JGCA** » Sat Feb 04, 2012 6:44 pm

No specific reporting is required, you will simply disclose teh purchase as a capital acquisition on your tax return thats all at the cost you paid for it, do not worry about this is a normal business transaction no other disclosure for tax purposes is needed.

Slong · Post by **Slong** » Fri Feb 10, 2012 12:09 pm

JG,
Thanks a lot for for posting.
I have a question regarding Michigan residents with Canadian rental income. How can I be sure that I don't have to report this income on Michigan Tax return but only reportable on US federal tax return. Can you please provide a referance that says Michigan residents don't have to report Canadian rental income.

Thanks again

nelsona · Post by **nelsona** » Fri Feb 10, 2012 1:05 pm

http://www.michigan.gov/documents/taxes ... df#Page=13

"Residents may subtract:
â€¢ Net business income earned in
other states and included in AGI, and
â€¢ Net rents and royalties from real
property or tangible personal property
located or used in another state.
"
It has been established that "other states" includes canada.

Slong · Post by **Slong** » Fri Feb 10, 2012 1:19 pm

Thanks and you all are awesome.