Even though the Canadian dollar is performing poorly against its U.S. counterpart right now, the attraction of owning a property in the sunny south remains compelling.
Property prices in places like South Florida, Arizona and even California (think Desert Hot Springs, rather than Palm Springs if you’re looking for a bargain) are still surprisingly competitive.
The big concern is estate taxes south of the border. Even if you’re resident in Canada and not a U.S. citizen, you could be liable for U.S. estate tax on any U.S. assets that you own at the time of your death – and U.S. real estate is a problem because the U.S. estate tax liability can be significant.
Prior to 2005, many Canadians held their U.S. real estate in a Canadian corporation. For Canadian tax purposes, the taxman used to allow these corporations to exist without assessing a taxable benefit on the shareholder for personal use of the property. Not any more.
Using a Canadian partnership to own your U.S. real estate is a reasonable method of avoiding the U.S. estate tax, as is ownership by a trust.
The trust needs to be set up before you acquire the property, to avoid complications. It’s wise to avoid earning rental income on the property held by the trust to eliminate U.S. tax filing requirements and ensure that no taxable benefits are triggered.
The Ritcey Team can’t stress enough that any attempt you make to acquire property in the U.S. should be protected by a prior consultation with a U.S. real estate tax professional.
Through Scotia Wealth Management, we can introduce you to such specialists.
For further information on this issue, or if you have any questions, contact Dave Ritcey, Portfolio Manager of The Ritcey Team, 902-678-0048