Canadian on TN in US wanting to buy house in canada

[bigzee]

Hey guys sorry if the question is asked a bunch of times, but i want to buy a house for my parents back home in canada, just wondering how that would affect my tax situation in canada and in the US. i've been here in the US for 2 years now, been filling US taxes but i haven't filled taxed in canada for 2007 or 2008 i know it's bad but i had some bad advise before and now trying to fix things with my tax situation in canada. ,any help would be appreciated!

[Steven]

Well if you left Canada you don't need to fill in a tax return, but you need to have told the CRA that you left and on what date, they may pro-rate your deductions for that year (you'll have to file an adjustment) and you may owe a bit of tax. The US end is more important as you should have filed dual-status for the first year as explained in IRS publication 519. You need to have cut residential ties to Canada, i.e. no DL, healthcare card, told the bank you're non-resident for tax purposes, and filed Form 8891 with the IRS if you have an RRSP, etc. You may be subject to depature tax, read: http://www.cra-arc.gc.ca/tx/nnrsdnts/nd ... n-eng.html

If you buy a house in Canada for your parents and you own it (rather than giving them the money) it will be subject to capital gains tax when you sell it. Canadian CGT is assessed at 50% of the income tax rate, so if it's your only source in Canada in that year the CGT will be fairly minimal, unless the house has gone up massively in value. I think you also have to pay CGT in the US, and you claim a foreign tax credit in the US so you don't get taxed twice. The US CGT rate at the moment is zero on most gains, their CGT system is quite complex, read the IRS guide on it.

If you give it to them, the US has a gift tax, however at the moment it's minimal and it will be zero next year I think because estate tax is abolished for 2010 (but then comes back to life the following year bizarrely). Also if they die, you will have to go to Canadian probate, but presumably you'll have to do that if they have any assets at all.