FIRPTA – Capital Improvements That Increase Your Adjusted Basis

By
Amanda Shear
June 29, 2010 | All


Under the Foreign Investment in Real Property Tax Act (“FIRPTA”), a person or entity purchasing a U.S. real property interest from a foreign person is required to withhold ten percent (10%) of the amount realized upon sale (gross sale price) from a foreign owner such as a Canadian.  I.R.C. § 1445 What that means, in effect, is that the Seller has to remit ten percent (10%) to the IRS.

This withholding ensures that any capital gain tax that may be owed by Seller is paid to the Internal Revenue Service (“IRS”).  For additional information about Canadians selling U.S. property, please see David Altro’s March 10, 2010 Blog, What Happens When a Canadian Sells U.S. Property? There are numerous aspects and exceptions to the withholding requirement which will not be discussed in this short blog.  Instead, let’s focus on how to figure out the Seller’s tax basis and taxable gain upon sale.

In terms of capital improvements that will bump up your basis, here is what the IRS may be looking for…
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Radio Show- June 22

By
Matt Altro
June 14, 2010 | All, Radio Show

Montreal, Quebec – June 22, 2010



  • June 22, 2010


    David and Matt took an in depth look at Canadian Estate Planning issues. David explored the benefits of having a will such as protection from creditors and divorce for beneficiaries as well as using trusts for the purpose of income splitting. Later in the hour David and Matt crossed the border and addressed the issues of Probate. They closed with a short discussion on the issue to consider for a Canadian who wants to move to the U.S.

    • Read the rest of this entry »

Radio Show – May 27

By
Matt Altro
May 27, 2010 | All, Radio Show

Montreal, Quebec – May 27, 2010



  • May 27, 2010


    On the May 27, 2010 edition of “Dollars and Sense”, David and Matt took a look at the Arizona Real Estate Market with special Guest Arnie Porter of Arizona for Canadians. As well, they discussed cross border tax and estate planning issues such as: How to take title of U.S. property in order to avoid probate and incapacity, U.S. estate tax planning, and the tax benefits of living and working in the U.S.

    • Read the rest of this entry »

The EB-5 Green Card: A Canadian’s Ticket to Retirement in the U.S.?

By
Matt Altro
April 29, 2010 | All, Featured Post

This is the time of year when Canadians snowbirds who have been seeking refuge in the U.S. from the Canadian winters start counting the days.

“When did we leave Canada exactly? Was it November 15, honey? How many days have we been gone?”

The magic number is 182. If you are a Canadian and you spend more than your allotted amount of days in the U.S. per year, you may be subject to U.S. income tax on your worldwide income. Beware, Canada will still consider you a resident which may lead to double taxation on your annual income.

For most Canadian snowbirds, half a year is just fine. They go back and forth to the sunbelt states each year using up their days and they do not have tax issues given that they file the Closer Connection Exception Form 8840. For others, 182 days is not nearly enough. They may have a dream to retire in the warmer climate or they want to spend more time with their adult children / grandchildren who are living in the U.S. Some Canadians want to move their business to Florida or Arizona and want to have the right to work in the U.S.

In order to make these dreams a reality, several pieces of the puzzle must fit together. None is more important than obtaining a green card. There are several different routes available however most lead to dead ends. Either they are not eligible for a particular categories (sponsorship by a spouse or parent who is American), while others have too many restrictions and take too long (7 years of working for a specific company that is willing to sponsor them).

There is another route that has become increasing popular for high net worth Canadians who are moving to the states. It is called the EB-5 investor category green card. The EB-5 path allows Canadians to be eligible for a green card if they make an investment of $500,000 in one of the regional center projects that are approved by U.S. immigration.
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David A. Altro featured in the April 2010 edition of STEP Journal

By
Matt Altro
April 19, 2010 | All, News, Publication

The Canadian Way: David Altro discusses new tax issues relating to Canadians owning US real estate

Download the article here (PDF) , or read it below.

This article will look at the various tax and estate planning issues facing Canadians with special emphasis on the major impact of changes in the US estate tax rules under the US Internal Revenue Code (the Code) affecting Canadians. As of 1 January 2010, a Canadian owning US assets upon death in 2010 will not be subject to any US estate tax. ‘US assets’ for Canadian residents include US real estate and shares of stock of US corporations held personally.1

The gift tax rate drops from 45 per cent to 35 per cent. Beneficiaries no longer enjoy a step-up in the basis at death. Instead, the beneficiaries’ basis in inherited property equals the lesser of the decedent’s basis or the fair market value of the property on the decedent’s date of death.

US estate tax comes charging back in 2011. Should a Canadian pass away in 2011 owning US assets there will be tax if the value of the US assets exceeds USD60,000 and the value of the worldwide estate exceeds USD1,000,000. The estate tax rate will be 39 per cent to 55 per cent (with a 5 per cent surcharge for estates that exceed USD10,000,000 – up to about USD17,000,000). The gift tax rate will be 39 per cent to 55 per cent. Stepped-up basis returns, so the beneficiaries receive a new basis in inherited property equal to the fair market value on the date of the decedent’s death.

Formula for exemption non resident Canadians
US Situs Property X Current Exemption

Total World Estate

Example: Bob has personally owned a USD750,000 condo in Naples, Florida since 2009. Bob and his wife, Bev, are Canadian citizens residing in Toronto. Bob’s worldwide estate is USD8,000,000 and Bev’s is USD800,000. Their daughter, Amanda, is a physician residing in Boston with her US husband and their children. Bob’s son, Steve, is a businessman living in Toronto with his wife Sheila, who is a US citizen.

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Radio Show – April 22, 2010

By
Matt Altro
April 16, 2010 | All, Radio Show

Montreal, Quebec – April 22, 2010



  • April 22, 2010


    On the April 22, 2010 edition of “Dollars and Sense”, David and Matt discussed cross border tax and estate planning issues such as: What should happen if I pass away owning U.S. property? and, Will there be U.S. estate tax?
    Also on the agenda was a discussion on strategies for Canadians who plan on moving to the U.S.

    • Read the rest of this entry »

Florida Homes Magazine – Toronto

By
Matt Altro
April 16, 2010 | All, Seminar

· Brampton, Ontario – May 4, 2010
· Toronto, Ontario – May 5, 2010

Invited by Florida Homes Magazine, David A. Altro will be the guest speaker at their “Investing in Florida Real Estate and Beyond” seminar.

The Brampton seminar will held on May 4, 2010 from 6:30pm-9pm at the:

Lion Head Golf & Country Club
8525 Mississauga Road
Brampton, Ontario
L6Y 0C1

The Toronto Seminar will be held on May 5, 2010 from 6:30pm-9pm at the:

Crowne Plaza Toronto Airport
33 Carlson Court
Toronto, Ontario
M9W 6H5

If you would like to sign up for the seminar please fill out this form:

Your Name (required)

Email address (required)

Business phone

Home phone

Subject

Your Message

See all seminars.

Redefining the Image of a Law Firm

By
Shlomi Steve Levy
April 9, 2010 | All

What comes to mind when you think of a law firm? Take a second, close your eyes and envision it.

What do you see? Men in suits? Phones ringing off the hook? Associates diligently drafting letters?

While all of those pictures may in fact be accurate, there is a completely different side of the modern law firm that is often overlooked, and that is the technical one.

Technology is changing the face of the law firm as we know it. Being a boutique firm, we pride ourselves on using technology to our advantage to help carve out a niche. Whether it be through videoconferencing or embracing social media, new technologies are changing the way we interact and do business and we are proud to be a part of it.

You may be thinking “that’s great and all, but what’s the point of this?” Here it is. Yesterday I received my Ipad in the mail (for those of you who have no clue what I’m talking about, this should help bring you up to speed ). In this device I see the potential to change the way we do business. Here are a few potential changes I see the Ipad bringing about in our firm.

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Altro & Associates Get in the Game by Giving Back

By
Matt Altro
April 6, 2010 | All, Firm Update

Chaired by Altro & Associates own Chief Operating Officer Matthew Altro, Squash Crohn’s is a charity squash tournament benefiting Crohn’s and Colitis research. Back for it’s 3rd straight year, this year’s event will be held on Saturday, May 15 and will once again be taking place at Club CDL.

For the second year in a row, Altro & Associates returns as the championship court sponsor. This year, the firm will field two participants, with David Altro and Matt Altro playing in the event.

In order to raise money for the cause, David Altro has chosen to ask for donations in lieu of payment for his book Owning U.S. Property – The Canadian Way . If you are interested in obtaining a copy, please click here.

In its first two years, the event has raised almost $40,000, which has been distributed to various IBD research and care projects. This year, we have teamed up with The Montreal Children’s Hospital Foundation so that we can provide funds to the very important area of Pediatric IBD research and care.

If you are interested in playing in the tournament, or sponsoring a player please visit the Squash Crohn’s 2010 website.

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What Happens When a Canadian Sells U.S. Property? Part 2

By
David A. Altro
April 6, 2010 | All, Publication

As promised, here’s the second half of one of my favorite chapters of my book,
Owning U.S. Property- The Canadian Way – Chapter 10: Selling Your U.S. Vacation Home. Click here to read Part 1.



Chapter 10: Selling Your U.S. Vacation Home – Part 2

By David A. Altro.


Declaring the Gain to Canada Revenue Agency

A Canadian resident is obligated to declare her worldwide gains or losses wherever they may occur. Accordingly, the above sale must be reported on the Canadian income tax return of the Canadian resident/seller.
Here’s how it works: You file your Canadian income tax return, all the U.S. numbers are the same – although converted to Canadian dollars.

Is there a Credit in Canada for the U.S. Tax Paid?

There may be a foreign tax credit available to reduce your Canadian capital gain tax by the amount of the capital gain tax paid to the U.S. This could be achieved by applying the U.S./Canada Tax Treaty. However, you are out of luck if your property is in a standard U.S. revocable trust or a standard U.S. living trust, since the Canadian Income Tax
Act will not allow for the credit in such case. But should you have the title to the property in your Cross-Border TrustSM
or individually, you will qualify for a foreign tax credit so that the $52,500 paid to the IRS as a capital gain tax will be a full credit against the Canadian capital gain tax of $66,500 minus the $52,500 for a total combined capital tax of $66,500 (unless further reduced by the currency exchange loss).

If you, as the seller, reside in Alberta, the capital gain tax rate is a maximum of 19.5% of the net gain. In Quebec, the maximum taxable gain would be 24%, and in Ontario it is 23%. (Must be nice to live in the oil patch!)


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