NR73 Residency Status Clarficiation

[GeeBee]

My wife moved down to the US on a J1 visa for post graduate education a few years ago and has to return to Canada after her studies. I followed her 3-4 months later once I found a job. I'm a dependent on her visa (J2). We have continued to file taxes in both Canada and US. CRA to assess the 2009 taxes asked me to fill out the NR73 form and the result was that I'm deemed to be a factual resident. However, for my wife they went ahead and made her a non-resident on their own. On speaking to the International Tax Division, I asked them why and they said that I should complete the NR73 for her as well. We did that and they wrote back a couple of months later telling us that she is a non-resident (insufficient ties). Is it possible for one person to be a considered to be a resident and the spouse to be a non-resident? Both of us must return back to Canada as per the visa rules and neither of us severed our ties to Canada when we moved down to the US. Any suggestions on how to handle this situation?

[nelsona]

Your wife, since she cannot meet the statndard of US tax residency on he J1 status, should not be considered Cdn non-resident, regardless of her ties in canada vs US.

You on the other hand, should be a US resident.

It is indeed possible to each be of different tax residency.

However it looks like they got them reversed.

[shala]

Nelsona,
Can you please clarify what you mean by
"since she cannot meet the statndard of US tax residency on he J1 status,"

I thought that under J2 you are exempt from SPT for the first 2 years?
Is there something I am missing?


Thanks
--S

[nelsona]

There are some exceptions that might apply, but in general, yes, once you have been in J-1 for 2 years, J1 are no longer exempt.

Her tax residency would then solely be determined on her source of income. If t were from Cdn source (and thus exempt for US tax by treaty article XX) she would be deemed resident of canada.

Since she was considered non-resident, this must mean that her income is US-sourced, and thus, after 2 years she would be considered non-resident of canada.

Thanks for clarifying. CRA has probably acted correctly with regard to both statuses.