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Real Estate Nuts and bolts of owning U.S. property Taxes, taxes, and taxes should always be kept in mind when thinking of purchasing property south of the border. Any property purchase merits a full examination of not just the purpose of the purchase, but future use and intentions as well. And considerations should also include how the property will be transferred in the event of death. At every junction, Uncle Sam is waiting with his hand extended and, sometimes, so are the residents in what is considered a very litigious country. So protection becomes a huge issue. The basic approaches when purchasing personal use property in the U.S. include a straight-out purchase as an individual; a trust; or through a single-purpose corporation. But the Internal Revenue Service has dismissed the single-purpose corporation, leaving the other two as the main options for those buying a small home or condo. Purchasing the property as an individual means it can be held up in probate for a year before it can be transferred and that could end up being costly. It also requires the individual to file a U.S. tax return. Under the U.S./Canada tax treaty, each country has the right to tax real estate property. "We recommend . . . if you're buying U.S. property for personal use, you hold it in a Canadian trust" which is recognized across the border, says Nesathurai. He estimates establishing a trust could cost between $2,500 and $7,500, plus there's an annual tax, meaning it might not be worth it for a smaller purchase, such as a condo. A commercial property has its own set www.CANADIAN L a w ye r m a g . c o m F e b r uary 2014 21 Pierre-Paul Pariseau D iminishing property values in the United States and the highervalued Canadian dollar made purchasing property south of the border very tempting for Canadian residents in recent years. But the rules of ownership, including taxation, can differ substantially in the United States, particularly for nonresidents. And for those wanting to spend extended periods in the sunny south, lawyers might well want to advise their clients of a new system coming on track later this year that could have a substantial impact if they're not paying close attention. "It all comes down to a kind of costbenefit analysis," says Hari S. Nesathurai. By Marg. Bruineman