David A. Altro featured in the Montreal Gazette Monday, August 22nd, 2011

I do. But what about my taxes?

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 first question, about cross border marriage and taxes.

PAUL DELEAN
The Gazette
Monday, August 22, 2011


Relocating to the U.S. and cancelling a life-insurance policy were among the subjects raised in the latest batch of reader letters. Here’s what they wanted to know.

Q: “I am a Canadian living in Quebec, in a relationship with a Vermont resident. Should we marry and reside in Vermont, can I continue to work in Canada? Who do I owe taxes to? Should we not marry, can I reside in Vermont and continue to work in Canada? Anything else I should consider?”

A: Local attorney David Altro, who works in both countries, says that if you don’t marry, you won’t have the right to live in the U.S. without a work visa or Green card.

If you do marry a U.S. resident, that person can sponsor you to obtain a Green card. “You will always have the right to work in Canada as you will always be a Canadian citizen,” Altro said. If you reside in the U.S. and work in Canada, you will pay income tax to the Canada Revenue Agency for your Canadian-sourced income and also file U.S. income-tax return Form 1040 declaring your worldwide income. Under the Canada-U.S. Tax Treaty, you’ll be entitled to a foreign credit on your U.S. return for taxes paid in Canada. If you leave Canada, there may also be departure tax issues to look into, Altro noted.

Q: “I am a single, 59-year-old male, retired, living on Quebec Pension Plan payments. Since the death of my dear brother this past April, at age 66, I have no living relatives, nor close friends that I would consider leaving my house and estate to. I do have life insurance and a will, but the beneficiary would have been my brother. Should I cancel the life insurance and will, or just forget about it and leave it to the government?”

A: You don’t specify what the life-insurance policy costs you annually. It can be a substantial expense for older people, especially if your income is limited and there’s no longer a family beneficiary that you’re looking to protect or assist. It could probably go if you have enough assets to cover funeral/ burial expenses (which you can prepay, if you desire, to simplify matters). You mention having a house, which is a significant asset.

Since you already have a will, modifying it to designate somebody else as beneficiary is a relatively simple task, and that somebody could well be a charity or church of your choice.

This way, you get to decide how your personal legacy is distributed, not the government.

Q: “I’m 61 and since August receive a monthly pension (RREGOP) as a former employee of the government of Quebec.

But I’m still working and receiving other income as an independent worker. To reduce income tax, I’d like to split my pension with my wife.

How do I go about doing that? Can my wife contribute to her RRSP using that income?”

A: The RREGOP pension is eligible for splitting and as much as 50 per cent can be allocated to your wife, said Sydney Berger, tax partner at accounting firm Bessner Gallay Kreisman. That election is done on your respective income-tax returns, by completing form T1032 (federal) and Schedule Q (Quebec), and no further steps are required.

“Pension income transferred to your wife is not earned income for purposes of calculating the annual RRSP contribution room,” Berger said.

The Gazette invites reader questions on tax and investment matters. If you’d like your query addressed, 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

David A. Altro featured in the Montreal Gazette, Monday, August 8th, 2011

How to avoid estate-tax issues in U.S

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 first question, about policy ownership.

PAUL DELEAN
The Gazette
Monday, August 8, 2011


A cross-border insurance question and potential reduction in Guaranteed Income Supplement (GIS) payments were among the topics raised in the latest batch of reader questions. Here’s what they wanted to know.

Q: “I have a life-insurance policy with my daughter as beneficiary. She’s a U.S. citizen and lives and works in the U.S., I reside in Quebec. Can I transfer ownership of this universal-life policy to her, or would this pose a problem since it’s a Canadian policy? And would there be any tax consequences, now or later, in either country?”

A: Lawyer David Altro, managing partner of Altro & Associates, doesn’t recommend transferring ownership of the policy, or doing nothing. “Transferring ownership might trigger a U.S. gift tax in your hands as the donor. Leaving things ‘as is’ will mean that upon your death, she will receive the policy proceeds tax-free, but upon her subsequent death as a U.S. citizen (even if she moved back to Canada), the value of the insurance and growth therein, if any, will form part of your daughter’s estate for U.S. estate-tax purposes. That means Uncle Sam may take a big bite out of it before it goes to her kids.” Altro suggests creating an irrevocable life-insurance trust, with the daughter as beneficiary. He said that will avoid U.S. estate-tax issues “for numerous generations.”

Q: “My wife receives the (federal) Guaranteed Income Supplement (GIS) and next year will begin collecting about $500 a year from a Registered Retirement Income Fund (RRIF). How, if at all, is this likely to affect the GIS? Is there some formula for calculating the impact?”

A: Yes, there will be an impact. Virtually any income other than the basic Old Age Security pension (OAS) and up to $3,500 a year in employment income affects GIS, which is intended for low-income seniors, with the amounts determined by marital status and net annual income. Based on the charts at the government website (servicecanada. gc.ca), an extra $500 a year in 2011 will reduce GIS entitlements by about $10 a month in the case of a couple where both partners receive OAS. Once a couple’s combined income (not including OAS) tops $21,360, the GIS is phased out completely, as it is for singles at $16,176. However, if your wife starts receiving the RRIF money in 2012, there’d be no effect until mid-2013, since GIS payments from July through June are determined using income figures reported for the previous calendar year.

The Gazette invites questions on tax and investment matters. If you’d like your query addressed, 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

There’s no time like the present!


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The United States housing market crash of 2008 brought on heavy heartache, discouragement and depression to property owners throughout the country. If you are a Canadian resident who owns U.S. real estate in a corporation, there is an opportunity for you to benefit from this unfortunate crisis.

One major disadvantage of holding U.S. property in a corporation is the extremely high capital gain tax rate. The U.S. capital gain tax rate is 35%, plus an additional 5.5% if the property is in Florida. (This additional rate varies from state to state.) Capital gain tax will be triggered the moment you sell your property out of the corporation and into a new structure. Generally, the fair market value of real estate has been at a standstill since the 2008 crash. Property values have not yet begun to rise, but we suspect that they will over the next few years. It is up to you to take advantage of this opportunity while property values are still low. In order to save the high U.S. corporate capital gain tax of a future sale with profit, you may want to consider selling your property into a more tax efficient structure sooner rather than later in order to benefit from lower capital gain tax expenses.

The other major disadvantage of using the corporation as a home for your property is the shareholder benefit rule. As of January 1, 2005, the Canadian Revenue Agency charges a taxable benefit to shareholders using a corporate asset for personal use, e.g. a U.S. vacation home. This means that the rental value of the property will be added to the shareholder’s income, and consequently taxed. Only properties that were purchased prior to January 1, 2005 are grandfathered into the old rule and exempted from such a tax. If you have purchased a vacation home using a corporation after this date, you must declare this extra income and as such will be taxed. Take the time to evaluate your situation, as selling your property out of the corporation may be your ticket to avoiding the shareholder benefit rule as well as a large capital gain tax.

You’re probably wondering if the hassle of selling your property from the corporation to a new structure is worth it. The process itself can seem a little overwhelming at first. Consulting with a Cross Border Specialist will put you at ease as they explain each step of the process to ensure a seamless transition.

Whereas the corporation allowed you to own U.S. property without worrying about probate, incapacity issues or U.S. estate tax, discussing the matter with one of our Cross Border Specialists will allow you to explore various strategies in order to establish a more tax efficient ownership structure, while preserving the same advantages. They will help you to file the necessary paperwork, create the new structure, and sell your property from the corporation to the new structure.

There are two important costs in this process that cannot go unmentioned; 10% FIRPTA withholding (Foreign Investment in Real Property Tax Act – Section 1445 of the Internal Revenue Code), where a non–U.S. resident sells U.S. real estate, and documentary stamp tax, also know as transfer tax. While FIRPTA can be avoided completely by filing for a withholding certificate, transfer tax cannot be avoided, as it is triggered the moment any U.S. property is sold.

If you are in a situation of owning your U.S. property in a corporation, now is the time to explore your options. There’s no time like the present!