Cross Border Series EP 11 – John : RRSPs in Canada


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Cross Border Video Series


John: RRSPs in Canada

John moved to Atlanta in 2005, and has an RSSP worth $400,000 back in Canada.

John want to know if he can access his money since he is currently a non-Canadian resident? Would there be any tax implications?

David A. Altro informs John that as a Canadian, he would be subject to almost 50 % tax if he were to withdraw his RRSP. However, since John is a a non-resident of Canada he is eligible to collapse his RRSP at a tax rate of 25%. David goes on to further explain that the tax can ultimately go down to 15% and if put in the appropriate structure the tax may be recovered by redeeming foreign tax credits.



Cross Border Series EP 10 – Andy: U.S. Estate Tax


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Cross Border Video Series


Andy: U.S. Estate Tax

Andy’s father lives in Toronto and owns a million dollar Miami condo in his name. His worldwide assets are around $10,000,000. Andy is wondering if there is any estate tax on his father’s assets.

David A. Altro explains that Andy’s father will have to pay a lot of estate tax if he dies after January 2011 when the estate tax law comes back. Moreover, U.S. Estate tax is a huge problem and even more so for Canadians who own in the U.S.. The best option would be to see qualified cross border professionals before buying the property. However in Andy’s father’s case, the best option for him would be to sell the estate to a trust in favor of Andy. That way the trust doesn’t die and there will be no U.S. estate tax upon Andy’s father’s death.

You may also use our online U.S. estate tax calculator, which will help you calculate your exposure.


Cross Border Series EP 9 – Jacques: Canadians Starting a Business in the U.S.


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Cross Border Video Series


Jacques: Canadians Starting a Business in the U.S.

Jacques wants to buy a business in Florida and continue living in Montreal. What structure should he consider for his business to avoid double taxation?

David A. Altro recommends consulting with a professional cross border consultant before embarking on their new US venture, as there are lots of aspects to take into considerations such as number of employees and the type of investment required.

The most popular structure recommended by US attorneys is the LLC, which provides lots of advantages to US citizens, but allows for the dreaded ‘double taxation’ for non residents.

One of the best structures for Canadians is to incorporate as a C-Corp, and have the shareholder of the C-Corp to be the Canadian company. This structure allows the least amount of taxes payable in both the U.S. and Canada.



Recession, Robo-Signers, and Recalls



Many Canadians looking to scoop up bargain Real Estate in Florida are finding themselves in a whole lot of hot water, instead of on the sunny beaches of their dreams. In fact many are now asking themselves “if we bought it…don’t we actually own it?” For many the answer, sadly, is no.


We at Altro & Associates, LLP are often asked why an attorney is needed if a title company has been appointed in a U.S. real estate transaction. That same question was also asked by Sonja Kleiman, a paralegal at our firm. The present article will shed some light on why!


A few weeks ago, I was contacted by a buyer we represented in a foreclosure closing in Florida and she was concerned about a recent report aired on CBC’s the National- In Depth & Analysis Report covering the Florida foreclosure fiasco, which raised a red flag for any Canadian who has recently purchased or is thinking of purchasing real estate in Florida.


As real estate attorneys practicing law in the wake of the subprime mortgage crisis, Florida, a favorite getaway and even permanent residence for many Canadians, was hit by a tidal wave of bank foreclosure and repossession cases. Unable to cope with the overload, banks and realtors recruited any and everyone to push through paperwork as quickly as they could, foregoing proper title examinations, forging documents, or simply skipping key signatures, formalities and rubberstamping affidavits without properly verifying authenticity in an attempt to move what was rapidly becoming billions of dollars in stagnant inventory.


Although the concept of robo-signing was first coined by investor advocate Nye Lavalle in 1999, things came to a head on October 8, 2010. Bank of America, one of the largest mortgage lenders in the US, declared a moratorium on all foreclosure sales and recalled thousands of transactions they suspected had been robo-signed. Cross border real estate purchases being the complex transactions that they are, unless all steps have been completed, the legal title of the property cannot be considered to have been transferred to the new owners.


There is some debate as to whether robo-signers were simply negligent and careless due to the overwhelming case load, or whether they were following orders to move it out at any cost; either way the result is the same. Suddenly your bargain real estate is no longer what you bargained for, tied up in already bottlenecked County Court for years to determine whether or not you own the property you bought and paid for.


Although Bank of America was first out of the gate to put a national moratorium on foreclosures, they were quickly joined by JP Morgan, Wells Fargo, and Citigroup, all recalling tens of thousands of foreclosures suspected of being robo-signed.


Purchasing Real Estate in the US is a complex transaction; if any one part is incomplete the legal title cannot be transferred and the consequences can be disastrous for the purchaser literally losing their homes. In fact your property could be sold out right from under you and you be obliged to turn to litigation.


Canadians vacation or investment home buyers beware the following statistics for foreclosure trends in South Florida:

  • RealtyTrac.com reports 1 in every 155 housing units received a foreclosure filing in October 2010.
  • Florida has the second highest foreclosure rate in the US for August, September and October 2010.
  • Broward, Palm Beach and Miami–Dade Counties, among the most popular with Canadians, account for nearly half of all of Florida Foreclosures.



Canadians and Americans alike are up in arms over the foreclosure scandal whether they bought winter homes or year round retirement property, scrambling to get answers.


Of course with the Canadian dollar hovering at par and favorable interest rates, there are many good investments to be had in the US. A deal is a deal, but beware: a foreclosure sale may be a dud.


If you have recently purchased a home in Florida or are thinking about investing in US real estate make sure you contact a cross border specialist with experience in these and many more complex issues such as Cross Border Estate and Tax planning.

Cross Border Series EP 8 – Katie: Partnership



Cross Border Video Series


Katie: Partnership

Katie bought a beautiful home in Palm Springs for $800,000 cash. Her attorney advised her to place it in a limited partnership to avoid taxes. Later that year she wanted to refinance and take out a mortgage from a U.S. bank. They refused her request because her home was in a limited partnership.

David stresses the importance of your attorney knowing all of your goals and objectives to ensure that he structures your property in the most effective way. In Katie’s situation, he recommends transferring her home out of the limited partnership into a Cross Border Trust which will allow her to get the mortgage.



Cross Border Series EP 7 – Jacob: Revocable Trust



Cross Border Video Series


Jacob: Revocable Trust

Jacob bought his Florida property in 2000 for $300,000 and six years later had it valued at $650,000. He was ecstatic about the $350,000 gain and retained the advice of a Florida attorney who recommended he establish a revocable trust. Everything was swell and dandy until he found out that he had triggered a disposition in Canada, meaning he had to pay capital gains tax on the $350,000 even though he still owned the property!

David informs Jacob that a Florida revocable trust is one of the worst structures for a Canadian citizen who owns U.S. property that has gone up in value. Having a Florida attorney who has knowledge of the Canadian tax effects is crucial. David recommends setting up a Cross Border Trust which offers all the advantages of a Florida Revocable Trust (avoiding probate, incapacity, low capital gains tax rates, etc) and does not create any problems on the Canadian side such as double taxation.



So Patriotism Just Isn’t Your Thing



Many dual Canadian and U.S. citizens have toyed with the idea of renouncing one of their citizenships in order to remove themselves from a taxation system. Seeing as though it is the United States which has most recently passed new legislation, we will deal with the U.S. taxation issues for U.S. expatriate.


This new legislation entitled The Heroes Earnings Assistance and Relief Act, the “Heart Act” or the “Act,” was signed into law on June 17, 2008 and applies to individuals who relinquish their U.S. citizenship or long term U.S. residency on or after June 17, 2008 and who meet any one of the following: a) have an average annual net income tax liability of more than $139,000 USD for the five (5) years preceding expatriation; b) have a net worth greater than or equal to $2,000,000 USD on the date of departure; or c) have failed to provide certified compliance with U.S. tax obligations for the five (5) years prior to expatriation. Despite the criteria mentioned above, there are however exceptions for certain individuals which would remove them from the implications of the Heart Act.


One area in which the Act regulates is what can be called an exit tax, or more specifically know as mark to market tax. It states that most U.S. citizens and long-term residents are considered to have sold their entire worldwide estate at its fair market value the day prior to renouncing their U.S. citizenship or terminating their U.S. residency. Such a disposition means any gain on the deemed sale is applied to the taxable year of the sale, i.e. the taxable year of departure. However, a seemingly beneficial option is to defer such payments to your estate upon death. In order to take advantage of this election one must be prepared to pay interest during the deferral period and provide adequate security to guarantee payment of the taxes being deferred.


There is another point which is important to mention, especially for individuals who will be expatriating away from family members and loved ones. The U.S. will allow you no more than thirty (30) days within the country during any taxable year over a ten (10) year period following your expatriation. Anyone who remains within their borders for more than the allotted time will be treated as a U.S. citizen or resident for such taxable year and therefore, taxed on his or her worldwide income. Similarly, if such individual should die during any year in which he or she remained in the U.S. for more than thirty (30) days, they will be treated as a U.S. resident, and the individual’s worldwide estate will be subject to U.S. estate tax.


Due to the complexity of the issues and the immediate U.S. federal income tax obligation, it is strongly urged to consult a U.S. tax specialist prior to making any permanent decisions, which can cause devastating results down the road. It is always advisable to seek professional advice in tax and estate planning, as other strategies and solutions may better suit your needs and situation.

Cross Border Series EP 6 – Justin: U.S. Citizen in Canada



Cross Border Video Series


Justin: U.S. Citizen in Canada

Justin is a U.S. citizen living in Toronto.  After a long chat with a friend who was in a similar situation, Justin revealed that he did not file with the Internal Revenue Service (IRS). His friend got concerned and urged Justin to take action right away, as he might be a shareholder in a Passive Foreign Investment Company (PFIC)!

Justin does not realize that he is still subject to all the U.S. tax rules as well as the Canadian. In addition to having to file is 1040 tax return every year that he’s living outside the U.S., Justin will need to be aware of PFIC implications if he is running a business in Canada.



Cross Border Series EP 5 – Carole & Steve: Becoming a U.S. Resident – Tax Planning



Cross Border Video Series


Carole & Steve: Becoming a U.S. Resident – Tax Planning

Steve and Carole are sick of the Canadian winters and want to move to Arizona to spend more time with their grandchildren. They are excited and ready, but worried about the tax ramifications given that they have a significant estate in Canada.

David A. Altro recommends tax planning before they become non-residents to avoid departure tax in Canada. He also examines other estate planning opportunities to avoid probate and estate tax as residents of the U.S..


Cross Border Series EP 4 – Doris: Children Living in the U.S.



Cross Border Video Series


Doris – Children Living in the U.S.

Doris has a son who is a doctor living and working in Boston. She wants to make sure that the money he will inherit from her will be shielded from U.S. tax on his subsequent death. What strategies can be considered to achieve the desired result?

David A. Altro recommends establishing a Trust for Life in Doris’s Canadian will. Watch the video below for details.