U.S. to Canada questions

Canada Bound · Post by **Canada Bound** » Thu Jan 13, 2011 9:02 pm

I own a small business in the U.S. I am selling that business to a U.S. based company that has a facility in Montreal. This is where I will be going to work. I am 40 years old and married. We are making payments on a house in the U.S. and plan on keeping that house initially. The payouts for the sale of the business will be over a three year period. I expect to be in Canada as a full time resident for ten or so years. My salary will be in the $115,000 range. I have some specific questions but any feedback/advice will be apreciated.
1) Can I maintain my current investments in the U.S.?
2) Am I eligible to make contributions into a RRSP?
3) If so, how will I deal with that when returning to the U.S. someday?
4) Do the payments from the business buy out have to be paid to me in Canada or can they be sent to a U.S. account and not ever factor into Canadian taxes?
5) If the max contribution into a RRSP is around $20,000, does all of that come off of your taxable income?
6) Will I still be able to write off the tax and interest on my U.S. home? If so, how?
7) Will there be any tax benefits or pitfalls to my situation that I would be unaware of?
That's all I can think of at the moment. Thank you in advance to anyone that can help.

nelsona · Post by **nelsona** » Sat Jan 15, 2011 12:07 pm

I assume you are a US citizen, and will get proper Cdn immigration status?

1. You can, but any brokerage accounts should be moved to canada.
2. Yes, after the first year of Cdn income, since your contrib limit is based on past year amounts.
3. You will file IRS forms to maintain sheltering. This is covered here at length.
4. Once in Canada, all income recieved worldwide is taxable in canada.
5. Yes, in canada. For it to come of your US tax return, it must thru an employer plan.
6. Only on your US return.

Canada Bound · Post by **Canada Bound** » Sat Jan 15, 2011 12:14 pm

Thank you! Yes, I am a U.S. citizen and will be receiving the proper immigration status and work permit. What is the capital gains tax rate in Canada (regarding the buyout money) and will I receive a tax credit in U.S. for taxes already paid?

Canada Bound · Post by **Canada Bound** » Sat Jan 15, 2011 12:42 pm

When I return to the U.S., I should collapse my RRSP after getting back to the U.S. and I will pay a 25% flat tax rate, correct? If so, will that money be taxable in the U.S. as well?

nelsona · Post by **nelsona** » Sat Jan 15, 2011 3:42 pm

Only the US tax paid during that year is creditable in canada.

If you have merely delayed recieving payment, is this really delayed income, or are you declaring the income -- all of it -- this year?

You will be taxed in US on the differnce between your non-deductible contributions and the amount you take out. if all your deductions are deductible (ie. they are made thru employer plan) then all of it will be taxable in US.

Canada Bound · Post by **Canada Bound** » Sat Jan 15, 2011 4:09 pm

The delayed payments is how this company wanted to structure the buyout of my company. Wouldn't that money be a capital gain as opposed to income? I assumed I would declare it as I received it. If my questions seem a little dopey or I seem confused it's because I am. Despite owning my own business, I do not have a good grasp on any of this stuff.

Canada Bound · Post by **Canada Bound** » Sat Jan 15, 2011 4:43 pm

Due to my lack of understanding of these matters, I'm going to ask a very broad and general question. With this situation I'm about to enter into, is there reason for me to believe that I will be paying significantly more taxes than I would be if these events were all taking place within the US? Thank you again for your help.

nelsona · Post by **nelsona** » Sat Jan 15, 2011 10:26 pm

Of course you will.

Canada Bound · Post by **Canada Bound** » Sun Jan 16, 2011 12:08 am

Bummer. Thanks for your help.

Canada Bound · Post by **Canada Bound** » Sun Jan 16, 2011 8:58 am

Actually, if I could re-phrase that question. Aside from income tax, should I expect to pay significantly more in taxes?

nelsona · Post by **nelsona** » Sun Jan 16, 2011 9:29 am

What? sales tax: yes. Property tax: yes. Corportate tax? probably. Drivers license? 5 times more.

You have heard of Canada before?

Canada Bound · Post by **Canada Bound** » Sun Jan 16, 2011 9:35 am

I wasn't actually refering to any of those things. My main concern is the buyout money and the long term savings I will accumulate while in Canada. I've asked enough questions though. Thank you.

nelsona · Post by **nelsona** » Sun Jan 16, 2011 11:50 am

tax on investment income IS income tax.

But, your right, you have asked enough questions...

rsargant · Post by **rsargant** » Sun Jan 16, 2011 2:38 pm

Not really any of my business but...

Without nelsona this "Q&A" board would be all "Q"s with no "A"s, which he also provides at no cost. Calling somebody who freely shares detailed accurate technical knowledge with others an "######" is ridiculous.

I would not presume to speak for him but as a technically minded person myself, I think he probably expects you to do some level of research (on this board and elsewhere) before asking questions. There is a big difference between asking for clarification/confirmation and asking for someone to think for you. I see people make the same mistake on software development forums all the time.

Canada Bound · Post by **Canada Bound** » Sun Jan 16, 2011 3:04 pm

I understand your point completely. I had read through countless threads on this site prior to registering and posting. I still couldn't wrap my head around some of it and was attempting to gain some information from the resident expert prior to my forthcoming meeting with an accountant. I tried to be gracious and thankful in my postings and in return, was treated disrespectfully.