Moving to the US with the outstanding loans in Canada

Great question!

When you leave canada, you will be considered to have sold most investments you have (like this stock) for Cdn tax purposes (deemed disposition upon departure) on that departure date. Any unused loss (that you cannot carryback) will be carried forward until you can use it again in Canada against a future capital gain when you return to canada (or possibly any taxable gain you have on your rented out CDn house, for example, if you sell this while outside Canada).

For US purposes however, the loss is not recognized until you (a) become US resident and (b) subsequently sell it.

So I would wait until I move before selling it, as this will get you a capital loss usable in both countries.

If you sell it before you become US resident, the loss will only be available on your future Cdn return.

Thanks agnelson.

So the key is to hold on to the account until I become a resident in the US. This sentence looks like an oxymoron to me. I can not become a resident of the US if I have a bank account in Canada, can I? Isn't bank account a residential tie to Canada?

A bank account (as well as most other things) are NOT considered sufficient residential tie to canada to keep you resident if you move to US. To some other non-treaty country perhaps, but not to US or almost any other treaty country.

Really, when moving to US, only leaving behind a spouse and a house for your own use are problematic, and even then, only if you live in temp housing in US. You would be doing neither. Living legally and working in US is sufficient to break Cdn residential ties.

You might want to pursue these tax issue on a tax forum like
http://forums.serbinski.com

Hi Agnelson,

On the special treatment of the rental income - since I am going to be renting it out "at the fair" market value, how does he withhold 25% of the rental income before depositing the rest in the bank.

The only differnce here is that, I don't have a third party here. How do I make sure that CRA is convinced that my friend is not living here for free, which he is not anyways.

Ed

All non-residents must make arrangements with either the renter or an "agent" (family, friend) to have 25% of the rent sent monthly to CRA. You get 75%. Its called NR (non-resident) withholding tax.
You can elect to request a lower withholding by filing an NR6 form, and/or get much of the tax refunded to you by filing a special 216 return at year-end.

The agent can be the tenant, and he MUST submit tax to govt and report that he has to you:
http://www.cra-arc.gc.ca/tx/nnrsdnts/cm ... s-eng.html


If you don't rent it out, or if you rent it at far below going rate, then neither can you claim any of the rental expenses, as govt will determine that your had no prospects of making income.

I strongly suggest you have a lease, even for your friend, as you both need to protect yourselves.

Since I will have two tenants in the house - one in the basement and one rest of the house. So, both of them have to send 25% to the CRA every month? How do I know that they have? I did not see any form from CRA.

Sirish

If you don't trust your tenants, find someone you do trust; they can be your agent. They can collect the money and submit the 25% to CRA. None of this is very complex.

You will be issued an NR4 receipt by whomever sends you and CRA the respective money. This was in the second paragraph of the reference I gave you, so I'm wondering if you read it.

Hi Agnelson,

The second paragraph put the onus on the tenant on an yearly basis. Meaning they file the NR4 form at the end of the tax year, which is fine.

But how does a tenant send the 25% of the rent "every" month to the CRA? Does the tenant fill NR4 every month and send the cheque to CRA?
That's the part that is not clear to me.

Say the rent is $1000 a month. Where/how does a tenant pay $250 every month to the CRA? I am afraid I can not see that on the second paragraph.

The agent sets up an account with CRA. You can read the details by following the link I already gave you. The word NR4 is a hotlink.

I think you should get an agent.