US Citizen and Canadian Permanent Resident

[otto]

I have been reading the forum it is really very helpful and I am writing to ask for clarification as to exactly what forms I will have to file next year. This will help me do my planning from now until then. I'm sorry if this post is confusing but I am getting very lost trying to figure out my taxes for 2008. Thanks

My situation:

I am a US citizen and became a Permanent Resident in April 2008 and started living in Canada since this time. I am married to a Canadian citizen with no ties to the US. I am self employed with income from work done in the US and Canada for a Canadian company. In 2008 I will have investment income from the US as well Cap Gains.

Questions:

1. Am I resident of the US for 2008, Canada or both on a part time basis?

2. Does the investment income and cap gains have to be filed in both countries or just the country that I was living in when the taxable event happened?

3. I understand I can take a tax credit or deduction for each separate category of income but what I don't understand is which country gives me the credit. Can I choose for each category or do I fill out the tax forms for both contries and then take the credit against the higher taxing authority? Which countries forms do you file first?

4. Which forms do I file in each country?

Thanks for your help.

[nelsona]

1, You became a Cdn tax resident in April because you moved there. You will file a regular Cdn/prov tax return, but will follow the instructions in the "newcomers" guide from CRA.

As a US citizen, you will conyinue to file a 1040 reporting world income year after year no matter where you live.

2. For Cdn tax, you re not taxable on any capital gains or losses earned before april. You are also deemed to have aquired evertying you owned on that date at current market value. This is known as deemed acquisition, and described in the necomers guide.

For US, you will still need to report all capital gains losses as if you lived in US. Any Cdn post-april income will be eligible for use asa taqx credit on yuour 1040 thru form 1116.

3. Generally, the country in which the income is sourced, does not give any credit.

[nelsona]

4. Tax software will figure out your forms.

[nelsona]

Just to clrify my response in item 2:
Any Cdn TAX on post-april income will be eligible for use as a tax credit on your 1040 thru form 1116.

[otto]

Thank you so much. Sorry for this long post but I believe your analysis will also help other US people marrying Canadians.

I read the newcomers guide on the CRA site and now I have questions about my tax residency that concern me. I only filed in the US for 2007 on the advice of two accountants and now I wonder if I need to go back and correct this, and if so, can I still claim the usual tax credits.

I married my wife, a Canadian citizen who has only ever lived in Canada, in March of 2007. Our wedding was in the US. After the wedding she returned to Canada where she owns a house and a business. I continued to stay in the US but made frequent trips to Canada. My health insurance, car, bank accounts were all in the US. I didn't own the house I was living in but all my stuff was there and i had been living there since 2006. I considered this my legal and tax residence and paid state taxes. Also, I wasn't able to work in Canada so i wanted to wait until I recieved my work permit and PR card before i formally moved to Canada.

However, once I got married in March I did have a wife and a house available to me in Canada (substantial ties). I also applied for permanent residency as an "in country" applicant in 2007 during one of my visits to Canada. I noticed today when I was looking through the immigration docs that one of the questions I answered during that process was, "when did you last enter Canada". I answered August xx 2007. When I recieved my PR interview this date was on the confirmation form that they give you to sign and it is marked as "original entry date". I had left and returned several times between August and when I finally got my PR card.

so...

1) Should I got back and refile for 2007 as a resident or leave it alone? I am sure if I ask CRA to make a determination they will say I am a resident.

2) Does the fact that I applied "in country" getting sponsored by my spouse make me a tax resident for 2007? Basically, this form of sponsorship is to enable spouses to live together while they are waiting for the PR approval to come through. They even tell you not to leave after you apply but I did all the time.

3) If I was actually a Canadian resident in 2007 can I still claim the usually credits and deductions? Will I have to refile my US 1040 too?

Thanks and sorry for this long post. Thank god it's not tax season now.

[nelsona]

You are fine with the April 2008 residency date. Your center of vital intersts (a treaty term which trumps any Cdn definition) was still US.