David A. Altro featured in the Montreal Gazette

RRIF or LRIF: What’s the difference?

David A. Altro is a frequent contributor to Paul Delean’s business column in the Montreal Gazette. Click here to view the article online or scroll down to read David’s answer to the third question, about acquiring an appartment building in Florida through an LLC (limited liability company).

The Gazette
Monday, May 23, 2010

MONTREAL – The taxation of annuities and the difference between Registered Retirement Income Funds and Locked-In Retirement Income Funds were among the topics raised by readers in the latest batch of letters. Here’s what they wanted to know.

Q: “When an annuity is created from a pension fund, the payout is taxable because the pension fund was set up with pre-tax money. If one were to buy an annuity from one’s savings or lottery winnings, is the payout still subject to tax?”

A: If you use non-registered funds to buy an annuity, this is what’s known as a prescribed annuity. “They offer beneficial tax treatment since each monthly payment constitutes both income and a return of capital,” said Jamie Golombek, managing director of tax and estate planning for CIBC Private Wealth Management.
Under the tax rules, each monthly payment is deemed to constitute the same amount of interest and capital, which provides a significant tax deferral since the tax owing on the interest portion of the payments is spread out evenly over the term of the annuity.

Q: “What’s the difference between an RRIF (Registered Retirement Income Fund) and LRIF (Locked-In Retirement Income Fund)? Does the province where the plan is registered have a bearing on how the plan works?
I imagine that the net left in both plans would transfer to a spouse tax-free after death but I would like confirmation on that. I’d also like to understand what amounts you can withdraw from either. Is it different for a RRIF than a LRIF?”

A: Golombek explains it this way: a RRIF is an investment plan established with registered funds (usually from an RRSP), while an LRIF is pretty much the same thing but with funds that originated from a pension plan. That makes the LRIF subject to pension legislation, which includes locking-in restrictions.
Pension funds can be governed under federal or provincial legislation and though there are many similarities, each jurisdiction has its own rules. Both the RRIF and LRIF have obligatory minimum payments starting the year after the plan is established; the LRIF also has a maximum annual withdrawal. Like a RRIF, an LRIF can be transferred to a surviving spouse at death, subject to certain conditions.
“The LRIF was first introduced along with the Life Income Fund (LIF) by some pension regulators to allow more flexibility than an annuity in terms of how much income the annuitant could potentially receive in a given year,” Golombek noted. It has since been eliminated as a retirement option everywhere but in Newfoundland and Labrador, “as the advantages of an LRIF have been incorporated into the LIF.”
In addition, a few jurisdictions, such as Quebec, have an optional temporary income provision under the LIF allowing a greater-than-normal withdrawal, subject to certain conditions.

Q: “Our family and a few partners are considering purchasing an apartment building in sunny Florida. We are planning on acquiring through an LLC (limited liability company). Is this advisable?”

A: David Altro, who is both a Quebec notary and Florida attorney, doesn’t recommend that option. “For tax purposes, the IRS will consider it a flowthrough to the owner members, whereas Canada Revenue Agency will consider it a corporation and tax it as such, so foreign credits may be lost for income and capital gains tax, resulting in the dreaded double taxation.”

The Gazette invites reader questions on tax and investment matters. If you’d like your query addressed, please send it to Paul Delean, Gazette Business Reporter, Suite 200, 1010 Ste. Catherine St. W., Montreal, Que., H3B 5L1, or by email to pdelean@montrealgazette.com
© Copyright (c) The Montreal Gazette

Chapter 14: A Real Estate Primer – Part 2

Here is an excerpt from Chapter 14 of Owning U.S. Property – The Canadian Way, by David A. Altro.

Click here to read Part 1, where David A. Altro explains the differences between buying property in the U.S. vs Canada, title insurance and buying resale vs. buying from a builder


What is the flip? Well, some people might think it is a hairdo – but in the context of this book, we are discussing the buyer’s right to assign the contract for sale and purchase to a third party prior to closing with the seller/builder.

Generally, a builder’s contract will not permit the assignment to a third party prior to closing unless negotiated in the initial contract and a commission is given to the developer. When the market was hot builders would not allow a flip as that put the contract purchaser in competition with the builder.

Here’s an example of the flip: Suzana is the contract purchaser with the builder, and she flips it to Alex and Maggie prior to closing. The builder gets only one unit sold; that is, to Alex and Maggie. However, if the buyer is not allowed to assign the contract, then Suzana has to close and Alex and Maggie will buy directly from the builder.

Of course, Susana could sell to Alex and Maggie after the closing, but she would incur all the closing costs, which will reduce her profits. Consequently, if we are representing Suzana we need to know her motive for the purchase and whether this is an issue that has to be dealt with in the contract for for sale and purchase.

In today’s market, the flip is rather hypothetical. It is unlikely that there might be an increase in the value of the property within the one to two year period from the day when Suzana signs a contract until the date for the closing upon completion of the condo.


The short sale is a product of the downturn in the real estate market. It has nothing to do with the stock market nor with the prohibition against short sales in the stock market that was decreed by President Bush in September 2008.

Clients of mine from Toronto, Rick and Jorge, flew down to West Palm Beach and negotiated an accepted offer on an $800,000 three bedroom, two bathroom condo in Boynton Beach, Florida. The sellers paid $1,200,000 for the property a few years ago and, shortly after the purchase, refinanced it to pay for the renovations. Presently the outstanding balance of the mortgage is $1,200,000. The sellers are in for a total of their purchase price of $1,200,000 plus $300,000 of renovations.

In order to close this deal for Rick and Jorge at $800,000, the sellers will have a short fall of $400,000 just to pay off the existing mortgage loan. However, the sellers are willing to make a deal just to get off those mortgage payments. This is what we call a short sale.

The sellers must negotiate an agreement with their mortgage lender, requesting that the lender accept $800,000 and forgive the rest of the outstanding loan balance of $400,000 because the sellers are short the difference.

Technically, the seller’s mortgage lender sends their appraisal out to determine whether or not the $800,000 offer is, in fact, the fair market value. Also, the bank analyzes the credit worthiness and ability of the sellers to repay the loan.

Such procedures may take months, during which time the buyer does not know whether he has a firm and binding deal since the seller’s acceptance is contingent upon their mortgage lender’s approval. (Only about 20% of such proposed short sales are accepted by the lenders).

Upon approval by the lender, the deal goes hard and the buyer’s attorney can start the title examination and analysis to determine whether or not there are liens on the property other then the lender’s mortgage. In such cases, it is common to find that the condo fees are in arrears as well as the real estate taxes.

These issues do not cause any great problems for the buyer. He is protected from all liens, bad taxes and condo fees so long as buyer’s attorney does his job.


If you are a buyer, you may want the option to cancel the deal at any time prior to the closing. Certainly, the seller will not unilaterally give you this right. However, look at the default clause carefully.

Where the default clause states that should the buyer default, the seller’s sole recourse is the retention of the buyer’s deposit, then you can walk away from the deal without incurring a lawsuit or seizure of your other assets.

In today’s market, many contract purchasers of new condominiums have taken this route. From the time of signing of the contract two or three years ago until today, values have dropped in an amount greater than the amount of the deposit.

Currently in Florida, there are many speculators who purchased from builders prior to construction. Now they may try to cancel or walk away from the deal. You should contact realtors, builders and banks to pick up these kinds of bargains.


When you sell a condo, most of the structural issues are covered by the condominium association such as roof, walls, garages or swimming pools. That leaves the electrical, mould, plumbing problems, water damage, etc. or non-conforming improvements.

If you are selling a single-family home, there is no condo association and therefore all of the foregoing issues are in play.

Let’s look at an example. In a standard sale, what if the roof leaks four weeks after the closing due to a heavy rainfall? The repairman opens the ceiling and finds lots of mold. This probably means that it was a pre- existing problem. You, as the seller, will be responsible.

In order to avoid this kind of post-closing recourse against you as seller for a pre-existing defect, you should try to sell on a “AS IS” basis. Your buyer will not like this and it may make it more difficult to make the sale. That is a business decision for you to make.

If you are selling “As Is,” you advise your realtor and the contract to pur- chase would include the “AS IS” language (addendum) and also buyer’s right of inspection within a reasonable delay. If there are defects he can choose to either accept the property with the problems or repairs needed or walk away and get his deposit back.

If he agrees to take the property, there is no recourse against you for any defect or problems that show up after the closing that were pre-existing unless you have acted in bad faith.

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Radio Show – April 20, 2011

Montreal, Quebec – May 13, 2011

On the April 20, 2011 edition of “Dollars and Sense” on CJAD 800 AM, Matt and David took questions from listeners and welcomed special guest Richard Dolan.

David advised Claudio on his rental properties in Florida. Barbara got answers from David about how to pass on her U.S. property to her children and how U.S. estate tax may affect them.

Richard Dolan tells us exactly how he can help Canadians to buy U.S. property by asking key questions and teaming up buyers with qualified realtors in the U.S.

Then, David turns the tables on Matt and asks him about Cross Border Planning Partners, the specialists in helping Canadians move to the U.S. and realize their retirement dreams.


Part 1

Part 2

Part 3

Part 4

Altro & Associates on the Radio

Tune in to our upcoming radio show appearances:

Today’s Entrepreneur on Monday, May 16, 2011 at 7 pm on CJAD 800 AM in Montreal.

The Dollars & Sense show LIVE, Tuesday, May 24, 2011 at 7 pm on CJAD 800 AM Montreal.

The Real Estate Talk Show on Saturdays at 6 pm on Newstalk 1010 AM in Toronto.

Altro & Associates featured on Today’s Entrepreneur

David A. Altro will be a guest on Today’s Entrepreneur, a business oriented program on Monday, May 16, 2011 at 7 pm on CJAD 800 AM in Montreal.

Today’s Entrepreneur, hosted by Dan Delmar and Josh Miller, Partner from Fuller Landau, allows successful entrepreneurs to share their stories and inspire future and current business owners.

To learn more about Altro & Associates, LLP on the radio, please click here.

Altro & Associates featured on The Real Estate Talk Show

David A. Altro and Matt Altro join Simon Giannini and Richard Dolan on The Real Estate Talk Show on Newstalk 1010 AM in Toronto, Ontario.

David identifies some main issues that Canadians face when buying property in the U.S. and how the Cross Border Trust℠ and other solutions can help avoid some of those issues.

Matt discusses relocation strategies and how to plan to move to the U.S.

Listen to the shows below and tune in LIVE to The Real Estate Talk Show, Saturdays at 6 pm on Newstalk 1010.

Click here for the February 26th show
Click here for The March 2nd show

Want to check out past shows or other radio content? View our Radio Shows page.