Nelson: I recall you mentioning in a past post ( I have not been able to find it) that under the Treaty (non-disc clause?) all Canadian tax residents could theoretically elect to file as US tax residents even though there is no requirement to do so. I may of course have completely "misremembered" your comments. Could you elaborate a little on this please?
I'm interested because I have a situation where a client is a Canadian resident shareholder in a regular US corp with 4 other individual US resident shareholders. The latter four would like to elect as an S corp but can't.
Can the Canadian file as a US tax resident and thereby have the corporation qualify as an S corp? Or is this as I suspect, a wee bit too aggressive?
Thanks very much for your insight.
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Regards,
Carson Hirner
Nelson - electing to file as US resident?
Moderator: Mark T Serbinski CA CPA
Article XXV -- for individuals -- entitles them to file a 1040 rather than a 1040NR (ie. they do not have to satisfy any of the conditions which allow for filing a 1040 residence/citizenship/presence
The article also says that this applies to 'all taxes' imposed by the authority.
So undoubtedly one could fill-out a 1040, reporting world income, and determine their overall US Fed tax liability, and then determine that same liability as a non-resident, filing the minimum required under their situation.
If their liability was less under 1040 than as a non-resident, XXV could be invoked.
How this applies to an an S-corp and its owners? I don't know what the definitions of S-corp and ownership are so I'll leave that to you.
However, you did say that it is the US citizens that are being told that they cannot file S-corp, not simply the Cdn. I don't see how, then, this would be discriminatory against them, since this is a case of the IRS talking to a US citizen, which means they can do what they want.
If the USC's were allowed a certain tax break that the Cdn wasn't, THEN I could see this as a XXV issue.
You'll have to find in the S-corp regs under what circumstances a foreigner can be an owner.
<i>nelsona non grata</i>
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote"><i>Originally posted by nelsona</i>
Article XXV -- for individuals -- entitles them to file a 1040 rather than a 1040NR (ie. they do not have to satisfy any of the conditions which allow for filing a 1040 residence/citizenship/presence
The article also says that this applies to 'all taxes' imposed by the authority.
So undoubtedly one could fill-out a 1040, reporting world income, and determine their overall US Fed tax liability, and then determine that same liability as a non-resident, filing the minimum required under their situation.
If their liability was less under 1040 than as a non-resident, XXV could be invoked.
How this applies to an an S-corp and its owners? I don't know what the definitions of S-corp and ownership are so I'll leave that to you.
However, you did say that it is the US citizens that are being told that they cannot file S-corp, not simply the Cdn. I don't see how, then, this would be discriminatory against them, since this is a case of the IRS talking to a US citizen, which means they can do what they want.
You'll have to find in the S-corp regs under what circumstances a foreigner can be an owner.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
As usual, that's very helpful, thanks.
It seems that a C corp is unable to elect as an S corp when there is a non-resident shareholder, period.
---------
Regards,
Carson Hirner
Article XXV -- for individuals -- entitles them to file a 1040 rather than a 1040NR (ie. they do not have to satisfy any of the conditions which allow for filing a 1040 residence/citizenship/presence
The article also says that this applies to 'all taxes' imposed by the authority.
So undoubtedly one could fill-out a 1040, reporting world income, and determine their overall US Fed tax liability, and then determine that same liability as a non-resident, filing the minimum required under their situation.
If their liability was less under 1040 than as a non-resident, XXV could be invoked.
How this applies to an an S-corp and its owners? I don't know what the definitions of S-corp and ownership are so I'll leave that to you.
However, you did say that it is the US citizens that are being told that they cannot file S-corp, not simply the Cdn. I don't see how, then, this would be discriminatory against them, since this is a case of the IRS talking to a US citizen, which means they can do what they want.
You'll have to find in the S-corp regs under what circumstances a foreigner can be an owner.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
As usual, that's very helpful, thanks.
It seems that a C corp is unable to elect as an S corp when there is a non-resident shareholder, period.
---------
Regards,
Carson Hirner