Tax Partners accountants have developed expertise to assist clients who face double taxation under the US and Canadian tax systems.
Double taxation is a key issue for Canadians with US assets who spend a significant amount of time in the US each year. When Canadian owners of US real estate sell their US assets, they must declare the income from their sale in the US, paying any tax
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Owing to the Internal Revenue Service (IRS). Canadian residents must also declare the gain on a sale of US real estate to the Canada Revenue Agency (CRA). However, under the Canada-US Tax Treaty, there may be foreign tax credits available to reduce the Canadian capital gains tax owed to the CRA. Certain ownership structures, though, such as a standard US living trust or US revocable trust, may not allow Canadians to benefit from the Canada-US Tax Treaty. In such cases, double taxation results as Canadians pay capital gains tax to both the IRS and CRA without the assistance of foreign tax credits.
Our lawyers specialize in analyzing each client’s individual facts in order to determine the most beneficial ownership structure for preserving foreign tax credits under the Canada-US Tax Treaty.
Our team also guides clients through the unclear terrain of determining tax residency. The Canada-US Tax Treaty states that you can only be a resident of one country or the other. Determining residency for tax purposes, however, is a complicated question of fact and depends on such factors as the location of your primary home, the amount of time you spend in each country and the location of your personal and economic ties. The goal is to avoid dual residency, which leads to double taxation. Tax Partners accountants can help clients clarify their tax residency to both the IRS and the CRA.
Our lawyers also work with US citizens living in Canada who are subject to both the US tax regime, which taxes its citizens based on nationality, and the Canadian tax regime, which is based on residency.
For those clients who own US assets and spend significant time in both Canada and the US, tax planning becomes particularly important in order to avoid double taxation and to take full advantage of the Canada-US Tax Treaty. Tax Partners regularly works with clients to achieve these goals.