Each year I help over 500 clients file their Canadian and US tax returns as well as plan for both their Canadian and US investment accounts. I also regularly help new US clients plan for their move to Canada.
Dear Mr. Hogan,
I seek your guidance. I am currently on XXXXXXXX and once the international ferry starts up again after 4 November, I could come to your Victoria office. Or perhaps you do consults by phone, email and FAX.
I need: 1) a determination of my current Canadian tax responsibilities, including possible reduction of exposure by donating property to the local land conservancy in accord with the federal XXXXXXXX 2) help with preparation of the requisite tax returns; and 3) sound advice on how to correctly manage my cross border US/Canadian tax responsibilities going forward.
Here is my situation. I am a Canadian citizen married for the past XX years to an eminent XXXXXXXX . Because our professional work as XXXXXXXX necessitated it, we resided on XXXXXXXX has a field station. Notwithstanding living outside Canada, I never abandoned my personal ties to the Canadian community where I had lived previously, nor my intention to move back to Canada eventually. I continued to pay my BC medical insurance premiums, and so that we could eventually retire in Canada we purchased, as joint tenants, three parcels of land in Canada. For XX years we spent summers and holidays at a small cabin we hand built on the lesser of the three parcels, and in preparation to retire there, we spent four summers building, again by hand, a quirky little house—my heart’s desire—adjoining the seasonal cabin. This is where we were and what we were doing when my husband fell seriously ill. Because our little house was not yet ready to live in, I drove him back to the US and I took care of him there for eight months until his death from on XXXXX. In case intensions are relevant, one glimpse at the house we were building would establish beyond doubt that this was never meant as an investment property, but was a labor of love, built with the intention of spending our remaining years together living there. Let me add that my will, written several years ago, documents our intention that the other two of our three Canadian parcels would be gifted to the local nature conservancy—a registered charity—to expand an existing adjacent park and for carbon capture in this age when nothing else matters more. We had no preference that this transfer to the conservancy wait until after our deaths; it was just something we had put off attending to until such a time as we would be living in Canada and could give it proper attention. During the period when we owned them we made no improvements— roads, wells or structures of any sort— to those two properties.
I understand that by virtue of spending less than 183 days in Canada every year, I am a “deemed non-resident” Canadian. Because our household’s only Canadian income was passive income—interest from our our credit union checking & saving accounts, and the credit union withholds owed tax, I did not file a Canadian tax return, which I believe is correct and proper (at least I dearly hope I was correctly advised on this). Of course we did report and pay taxes to the US Internal Revenue Service, including on Credit Union interest (so that small amount was double taxed), and we filed the required FBAR (Foreign Bank and Assets Report) and Form 8938 (Statement of Specified Foreign Financial Assets). And of course we paid our yearly BC property tax on all three parcels. It was my understanding that as joint tenants of Canadian property, at the death of one of us, these properties would pass to the other with capital gains tax deferred until the second of us died. Having completed the settlement of my husband’s estate in the US, I recently applied to have the title of our joint tenancy Canadian properties transferred into my name. I was told by the law office that I asked to arrange the transfer that by virtue of our living in the US when my husband died we owe a tremendous amount in capital gains tax to both BC and the Canadian federal government, all three parcels having appreciated considerably in value (one of them ten-fold). The simple transfer of title I had been told to expect apparently is possible. This has thrown me into a gut-wrenching panic. I cannot raise the kind of money mentioned without selling at least two of the parcels, and then barely so. Two sleepless nights bring me to you.
Is this something you think you can help me with? For starters, I need a second opinion about whether in my circumstance I owe capital gains, or other taxes or fees. And if so, how is the tax rate calculated? Is the tax applied to the whole value of our property, or to the half deemed to have been owned by my husband? When is it due? Do I have any grounds for appeal? Are there ways to reduce what is owed—for example by gifting the two parcels to the conservancy now? Are there mechanisms to spread out payment over time if there is no way I can otherwise pay? And again, what do you charge for your expert advice and services? Thank you for your reply.
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