Canadian Lawyer

What to consider when buying property in the United States and other organizations primarily in one the data required to do the math. country or the other. Previously it was up to each To maintain your provincial health resident to do the calculations. • Whether it is a vacation care you cannot exceed 182 days in a "Now U.S. and Canada will have home or an investment calendar year outside of Canada. a way of independently verify• Residency rules Asset protection, through means such ing what your day count is. . . . as setting up trusts or partnerships, is The initiative was launched • Differences in mortgage what Christine Perry looks at with her back in 2011 without much financing and how high net-worth clients. "Your whole net fanfare. The final phase comes interest is charged worth could be wiped out. . . . You at least in July," says Berg. "Everyone • Income and estate want to separate personal from rental." [CRA, IRS, provincial health Those with rental properties often care] is going to know where tax implications don't realize that there's a way to avoid you've been and for how many the 30-per-cent flat withholding tax on days. We've been grading our own papers, giving ourselves all As. Now we have to hand the gross income, which happens right at the source. The tax papers in to the teacher. Gone are the days of grading your own treaty provides no reduction for rental income. But there is an option: the net basis election. The form allows the Canadian papers." The number of days Canadians can spend in the U.S. owner of U.S. rental property to be taxed on net income at a depends upon which rule you're looking at. For income tax graduated rate, allowing you to claim deductions, "and you're you're considered an American resident if you spend more not in the standard withholding tax regime. "If the election is not made in a timely fashion, you lose the than 120 days in a calendar year in the U.S. Under immigration laws Canadians are permitted to spend 180 days on a roll- ability to opt for that regime," says Perry, who focuses on U.S. ing 12-month period. U.S. estate tax, as well as Canadian resi- taxation in her practice with Keel Cottrelle LLP. The ability to dency, is determined upon facts and circumstances and one of deduct costs before paying the taxes could well make the difthe big facts is day count. Other aspects that come into play are ference between having viable rental property and running the whether you've severed ties with Canada, what country your property at a loss. And although that option is readily availprimary property is in, if you're a member of a country club able, it is not as well known. Jurisource_CL_Feb_14.indd 1 www.CANADIAN L a w ye r m a g . c o m 14-01-10 10:35 AM F e b r uary 2014 23

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