BirdTalk Dear Bird Talk, I am considering selling my U.S. condo and wonder if you have any advice on this. I have owned it for 10 years and it has gone up in value, so I know that I will pay capital gains tax in the U.S. Will the profit be counted as income in Canada? If I give some of that profit as gifts to my children, will they have to pay income tax on it? I realize that this is a good problem to have but, nevertheless, any advice you can give me will be appreciated. Anne Price Ed.: The profit will be considered as a capital gain in Canada as well, and will be taxable as such. After that, you can give portions of the gain to your children as gifts and there is no tax on that gift, assuming that they are Canadian residents. Dear Bird Talk, In 2019, we rented our Florida/Jensen Beach condo out to Americans (for the first time) for the months of February/March through a Jensen Beach-based realty management company. Can we pay the tax on these U.S. rental earnings in Canada, or must we pay it to the IRS? If the latter is the case (and we have to pay the rental earnings to the IRS), then what tax form would we use? And how will that tax form affect filling out our 8840 (which essentially states that we filed our 2019 taxes in Canada) if we have to pay the rental tax in the States too? And finally, if we must pay the rental tax in the U.S., have we opened ourselves up to worldwide tax? I still work, but my husband is retired. So that prospect would be scarier for me, as we both co-own the condo. Jane Bongers Ontario Ed.: By renting your condominium, you are considered to be operating a business in the U.S. In the year following the year of the rental, FORM 1040NR must be filed. You would also report the income in Canada, getting credit for any tax paid in the U.S. You should also file the 8840 for the relevant year, including it with the FORM 1040NR. If there is more than one owner of the property, there must be a separate filing for each person. There are no worldwide income considerations with this, as you are still a Canadian citizen. Dear Bird Talk, I am a board member and former vice-president of a Florida homeowners association. I was told that I may be in trouble with immigration, as I did help with new contracts and co-sign bank cheques. I am a legal resident of Ontario and have a winter home in Florida. The board decided that it was cheaper to not rehire the former manager and have the board do all of the oversight of running a moderately sized HOA. Am I in trouble? Joe Subbaro Ontario Ed.: There are two tests as to whether an activity is considered “working,” which would of course be prohibited. One is whether pay is received for the activity and the second is whether the activity is one that an American could be doing, and you are thus depriving him or her of gainful employment. As long as your activity is not for pay and is restricted to helping the owners of the units, we see no issues.We know many persons who have taken such positions on boards and they have never encountered any problems.Well done for volunteering your time! Dear Bird Talk, I am writing to you regarding an article in Magazine Issue 110 regarding wills in the U.S. Your response was NO, one does not need a special will for the U.S. I am attaching a letter which I sent to friends regarding an article in your summer issue last year. In it, you stated that you should have a U.S. will, and went on to add that a POA should be considered. This seems to be totally opposite to the current response. Would you please revisit these responses and advise appropriately. Thank you, Donald Adams Ontario Ed.: We are very conscious of the conflict to which you have referred. The article in CSANews was written by the general counsel of the CSA, who is licensed in Florida and Ontario. Opinions on the matter can differ and you can make a choice as to which you choose to follow. A Florida will is not a necessity, although many lawyers will recommend that you have one. As to Power of Attorney, the CSANews article was fully explanatory. Dear Bird Talk, There are two issues raised in the Bird Talk of the spring issue on page 8, where I am questioning your response. 1. There is no withholding tax on a U.S. sale of less than $250,000. To me, this means that I don’t need to submit a capital gains form to the U.S. IRS. If this were required, there would be withholding of any capital gain. The withholding tax is meant to force the taxpayer to submit a claim to get a partial refund. Seems that they are not concerned about anything less than $250,000. In fact, they have no social security number or tax identification number to verify that the appropriate capital gains formwas submitted. So why should this form be submitted and how will they know if a capital gains formhas been submitted or not? This seems to be the understanding in the U.S. 2. In Canada, we are required to report any real estate transaction of more than $100,000 at purchase. If the purchase price was less than this amount, what mechanism does the CRA have to force you to apply for capital gains? Again, as in the U.S. system, it seems that the CRA is not concerned about foreign capital gains on property purchased for less than $100,000. There is no T form showing this amount. So why report it? In the first case, a U.S. tax lawyer said that there was no need to report sales of less than $250,000. In both cases, you disagree with what the Bird Talk persons understood to be the case. My question to you is, what is your knowledge and training and expertise to make such a statement? Do you have IRS and CRA documents to back up your position? When one person says one thing and another person something different, you are left wondering what the situation really is. Thank you for your consideration of this matter. Don Axford Ed.: We have been researching and answering questions such as yours for more than 25 years. CSA also has a full-time research analyst (Evan Rachkovsky) and a dedicated legal counsel (WallaceWeylie), who is a licensed lawyer in both Florida and Ontario of whom we take advantage to assist in answering your questions. We have access to professional people in other provinces and in other states as well. Differing legal and accounting opinions are very common and are 10 | www.snowbirds.org
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