Hi there, new to the forum but it looks really useful. I am the sole owner of a private. corp. in British Columbia. I'm also the sole employee of the company. I do a lot of work in the US, getting a TN Visa personally, paying tax in Canada both corporately and personally. I live in Canada, but spend about 7 days a month in the US.
My company has some spare cash, and I want to buy a piece of property (in the company name) in Washington state. This would be investment only - no improvement on it, no rental income. I would eventually sell it in 3-5 years for hopefully some profit. I"m wondering what the tax implications may be. My assumption is that when sold there would be capital gains tax payable in the US, but I don't want to do anything that would screw up my present business in the US. That is, I don't want to get IRS chasing me around - I wanbt to handle this correctly.
Thanks for any help available.
John
US Investing by corporation
Moderator: Mark T Serbinski CA CPA
The house should not cause you any problem in terms of establishing residency in US for tax purposes.
For Cdn purposes it will be treated just like a cottage anywhere else in canada.
For US puposes it will produce capital gains, payable at sale.
Note that there is a 'problem' with the way CRA views foreign capital gains tax paid, in terms of the foreign tax credit. For several years now, the tax paid is immediately cut in half for credit purposes, under the wrong-headed conclusion that since the capital gains inclusion rate for canada is 50%, then the foreign tax must be cut in half also. This is silly of course, since really it is not the cap gains that was halved, but thh tax-rate.
So, you could see yourslef paying a little more tax over-all than if your cottage had been in Canada.
Other than that there should be no problem.
Just as an aside, as yopu may know the tax treaty is about to change drastically for "Independent Service" providers such as your corp. The number of days in US is becoming less important as the length of the contract., and the calendar year is not the measure anymore either.
I'm not saying that your business will become taxable in US, but all independant contractors are urged to make re-evaluate thier methos of operations in light of the upcoming changes.
the details are not set in stone yet. just a heads up for 2010 at the earliest.
For Cdn purposes it will be treated just like a cottage anywhere else in canada.
For US puposes it will produce capital gains, payable at sale.
Note that there is a 'problem' with the way CRA views foreign capital gains tax paid, in terms of the foreign tax credit. For several years now, the tax paid is immediately cut in half for credit purposes, under the wrong-headed conclusion that since the capital gains inclusion rate for canada is 50%, then the foreign tax must be cut in half also. This is silly of course, since really it is not the cap gains that was halved, but thh tax-rate.
So, you could see yourslef paying a little more tax over-all than if your cottage had been in Canada.
Other than that there should be no problem.
Just as an aside, as yopu may know the tax treaty is about to change drastically for "Independent Service" providers such as your corp. The number of days in US is becoming less important as the length of the contract., and the calendar year is not the measure anymore either.
I'm not saying that your business will become taxable in US, but all independant contractors are urged to make re-evaluate thier methos of operations in light of the upcoming changes.
the details are not set in stone yet. just a heads up for 2010 at the earliest.
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
Thanks for the quick response ... one thing, and I"m not sure if this affects the answer you gave ... there is no house on the property - nor will there be. It's a chunk of land. Also, to be clear, I'm not trying to establish residency in the US for tax purposes, I"m specifically trying to avoid it ... Thanks.
J
J
You did note that I was talking about 2 subjects . I answered your question abou the property: It will not cause you to be resident.
When I said it will not cause you any problems, I meant not cause you any undesired residential ties.
My second comment has to do with you having contracts with american firms and an employee in US (you) working on these. You have been successfully avoiding US taxation (although it is unlikley that you would have paid any more tax) by using the current rules. I was just mentionning that the current rules are changing, and that you should be evaluating your arrangements against those upcoming new rules.
When I said it will not cause you any problems, I meant not cause you any undesired residential ties.
My second comment has to do with you having contracts with american firms and an employee in US (you) working on these. You have been successfully avoiding US taxation (although it is unlikley that you would have paid any more tax) by using the current rules. I was just mentionning that the current rules are changing, and that you should be evaluating your arrangements against those upcoming new rules.
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