Canadian estates generally must file CRA Form T2062 clearance application where there is a disposition of a capital interest in an estate or trust to a non-resident of Canada, like to a U.S. beneficiary. This form is generally not required if the value of the interest is not derived from real estate. If it is derived from real estate per the Income Tax Act (“ITA”), it may be exempt under a tax treaty, hence…read more
The IRS has determined that a number of individual U.S tax returns filed by a NRA (“non-resident alien) have not attached to their tax return, the requirement per S871(d) of the IRC Code, a statement indictive of the election to treat the rental income as income effectively connected with a trade or business (“ECI”). The IRS has also determined that a number of non-residents have not reported rental income from U.S. property rentals….read more
During the week of October 16th,the Finance Minister announced changes to the July 18, 2017 proposed legislation.
The proposal to limit the availability of the capital gains exemption to active shareholders will be scrapped.
The proposed rules for determining the “reasonableness” of dividends paid to non-active shareholders will be simplified. It appears that capital gains on the sale of private corporation shares still could be included in “split income”, by virtue of the definition of…read more
These rules where designed to cause a deemed taxable dividend to individuals who receive share consideration and/or a promissory note on a non-arm’s length transfer of shares of a corporation resident in Canada. This could occur where the share consideration has a paid-up capital greater than of the transferred shares and/or where a promissory note exceeds a notionally adjusted tax basis of the transferred shares.
For example, if father sold shares of Fatherco to…read more
The proposed revisions to the corporate surplus stripping rules (section 84.1 of the Income Tax Act) will affect the post-mortem pipeline procedure.
On death, shares of OPCO are deemed to be disposed at fair market value, triggering a capital gain if the shares do not vest in a surviving spouse or spousal trust.
The estate acquires the shares at this fair market value. The estate may sell or liquidate OPCO, resulting in corporate tax…read more
If the proposed July 18, 2017 legislation is passed, commencing in 2018, tax at top marginal tax rates may apply to dividends paid directly or indirectly through a family trust to an adult. Previously this tax burden or what was commonly called “kiddie tax” applied to dividends paid on private corporation shares to a minor directly or indirectly from a family trust.
What now is called split income or split portion, the…read more
Certification of IRS Form W-7 ITIN application form
Effective April 17, 2017, the IRS reinstated foreign or non-U.S. certified acceptance agents that were disbanded on January 1, 2017. Therefore I can certify or alternatively review your W-7 to ensure it is complete and accurate. You will need to submit your original passport or obtain a certified copy of the passport from Passport Canada if you wish to self-prepare the W-7 without my certification. With certification, we just…read more
Often taxpayers, weather Canadian or U.S. tax filers are self-preparing their own returns with tax preparation software packages purchased in the market place. Problems arise numerous times in that the taxpayer not being aware of tax law, has omitted to file various required annual foreign information returns. This is likely due to the fact the software is not a professional version and/or the taxpayer-preparer is not reading any of the software return’s diagnostics.
From the U.S. perspective, foreign financial accounts requiring the…read more
A new treaty was signed on September 21,2016. When it comes into force, it will allow a reduced rate of non-resident withholding tax levied by the source country, on dividends, interest and royalties that is different from the 1975 convention. Source countries may require a waiver form or some certification of residency from the income recipient.read more
Taxpayer’s who do not agree with their notice of assessments or reassessments can file a notice of objection, appealing the Minister’s decision. Generally, one would first to go the appeals division as opposed immediately to Tax Court. Sometimes we file a T1 adjustment form where the Ministers’ adjustments are simply based on incorrect information. However, where there is a misinterpretation of the facts or it is a grey area, the appeals process is the…read more