Hi there,
I am a Canadian citizen working in the US since 2005 and thus a non-resident of Canada.
I plan to purchase a property with my sister who is a Canadian citizen and resident of Canada.
The title of the property will show joint ownership between me and my sister.
My sister plans on living in the property along with renting out part of it. My portion of the rental income generated from the property will be given as a gift to my sister to pay off her mortgage.
Because the my portion of the rental income is given as a gift to my sister, do I still need to report rental income based on what is described in http://www.cra-arc.gc.ca/E/pub/tg/t4144/README.html?
Are there any special tax implications due to the joint ownership of the Canadian property for me or my sister?
Thanks.
Joint ownership of Cdn property
Moderator: Mark T Serbinski CA CPA
Your portion needs to be taxed in canada like any other non-resident, ie. portion withheld and sent to govt.
You also need to report this income in US.
The gift is also taxable (gift tax that you pay) in US, unless it is less than ~11,000 per year.
When she sells, if you are still non-resident, your portion will be treated as being sold by non-resident, with special reporting.
It is complicated for nothing.
Why noy simply make a gift to her now of a portion of the down payment or whatever, have her live in it and rent it, and then, when she sell, she gives you a portion of the proceeds.
This would be a LOT simpler.
You also need to report this income in US.
The gift is also taxable (gift tax that you pay) in US, unless it is less than ~11,000 per year.
When she sells, if you are still non-resident, your portion will be treated as being sold by non-resident, with special reporting.
It is complicated for nothing.
Why noy simply make a gift to her now of a portion of the down payment or whatever, have her live in it and rent it, and then, when she sell, she gives you a portion of the proceeds.
This would be a LOT simpler.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
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baby_king_bob
- Posts: 14
- Joined: Tue Oct 13, 2009 7:00 pm
you may want to consider a trust agreement whereby title to the property is owned jointly with all benefits of ownership falling to your sister. not to quote fees for a lawyer, but you could probably have the appropriate trust agreements drawn up for around $1,000.
the benefit here would be, primarily, peace of mind. an informal gifting arrangement with your sister may work well while she's alive and well, but may not work so well in the event of serious misfortune (death or permanent disability). a trust agreement could address this concern as you would not be relying on a trustee to fulfill the verbal promises of your sibling.
the tax reporting upon sale of the property is not needlessly complex.
Canadian tax laws would respect a situation where your sister has full beneficial ownership but only 50% of legal ownership. I cannot speak towards US tax laws on this issue.
the benefit here would be, primarily, peace of mind. an informal gifting arrangement with your sister may work well while she's alive and well, but may not work so well in the event of serious misfortune (death or permanent disability). a trust agreement could address this concern as you would not be relying on a trustee to fulfill the verbal promises of your sibling.
the tax reporting upon sale of the property is not needlessly complex.
Canadian tax laws would respect a situation where your sister has full beneficial ownership but only 50% of legal ownership. I cannot speak towards US tax laws on this issue.
A trust declaration sounds like a good idea.
If I create a trust declaration whereby I have 50% legal ownership of the property and my sister remains the sole trustee of the property will she bear all tax implications? i.e she will have to pay property taxes, declare 100% of the rental income, etc? I essentially remain a silent owner?
Also, what happens when the property is sold? -- I guess since I'm not the beneficial owner, upon sale, I would not be subject to capital gains taxes? -- Since my sister is recgonized as the sole owner she will bear all associated taxes upon sale? Can she then gift me back 50% of the proceeds with no Canadian tax implications (of course there's US tax on the gift)?
If I create a trust declaration whereby I have 50% legal ownership of the property and my sister remains the sole trustee of the property will she bear all tax implications? i.e she will have to pay property taxes, declare 100% of the rental income, etc? I essentially remain a silent owner?
Also, what happens when the property is sold? -- I guess since I'm not the beneficial owner, upon sale, I would not be subject to capital gains taxes? -- Since my sister is recgonized as the sole owner she will bear all associated taxes upon sale? Can she then gift me back 50% of the proceeds with no Canadian tax implications (of course there's US tax on the gift)?
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baby_king_bob
- Posts: 14
- Joined: Tue Oct 13, 2009 7:00 pm
To your first question, yes, she will declare 100% of the rental income, etc. How certain costs (e.g. property taxes) are funded is entirely up to you. If you were so inclined to fund/gift half the property taxes from your personal bank account, the trust structure does not prevent this from happening.
Regarding your second question, you will be 50% title holder so upon sale of the property one-half of the gain/proceeds may be allocated to you.
You should seed guidance on the US personal income tax consequences regarding the proposed trust and, from there, you will want a carefully worded trust agreement. With that said, a trust agreement should achieve your desire to have benefits of ownership rest with your sibling while entitlement to capital is shared 50/50.
Regarding your second question, you will be 50% title holder so upon sale of the property one-half of the gain/proceeds may be allocated to you.
You should seed guidance on the US personal income tax consequences regarding the proposed trust and, from there, you will want a carefully worded trust agreement. With that said, a trust agreement should achieve your desire to have benefits of ownership rest with your sibling while entitlement to capital is shared 50/50.