capital gain tax on personal residence when leaving - T1161, T1243 T1244 - T2062 T2062A -

david ingram replies:

In the year that one leaves Canada to live in Germany, Australia, Panama, the United States or any other of the approximately 254 countries out there, that person must fill in a departing Canada tax return which will include:
*    form T1161 -  http://www.cra-arc.gc.ca/E/pbg/tf/t1161/t1161-07-e.pdf (List of properties by emigrant)

 and maybe T1243  - http://www.cra-arc.gc.ca/E/pbg/tf/t1161/t1161-07-e.pdf (Deemed Disposition of a Property by an Emigrant)

and T1244  - http://www.cra-arc.gc.ca/E/pbg/tf/t1244/t1244-07e.pdf ( ELECTION, UNDER SUBSECTION 220(4.5) OF THE INCOME TAX ACT, TO DEFER THE PAYMENT OF TAX
ON INCOME RELATING TO THE DEEMED DISPOSITION OF PROPERTY by an emigrant)

if there was any capital property which caused a capital gains tax to be paid on a deemed disposal.

Your friends moving to Germany may have tax on other items they own such as mutual funds or a stock portfolio but in the normal course of events will not have to pay capital gains tax because the house you live in is usually your principal residence and its sale is tax free as long as they are a resident of Canada.

If they have left Canada before they actually sell the house, they will likely run into a paperwork tangle and have to file forms T2062   - http://www.cra-arc.gc.ca/E/pbg/tf/t2062/t2062-08e.pdf ( REQUEST BY A NON-RESIDENT OF CANADA FOR A CERTIFICATE OF COMPLIANCE RELATED TO THE DISPOSITION OF TAXABLE CANADIAN PROPERTY)  and a

T2062A - http://www.cra-arc.gc.ca/E/pbg/tf/t2062a/README.html (Request by a Non-resident of Canada for a Certificate of Compliance Related to the Disposition of Canadian Resource or Timber Resource Property, Canadian Real Property (Other Than Capital Property), or Depreciable Taxable Canadian Property )

These two forms are filled out to stop the purchaser having to withhold 25% of the gross sale price and remit it to the CRA.

The same situation applies to you  in your move to the USA.

these other questions may assist you as well
----------------

Hi David,I am in the US for a 6 month contract making $72/h in Boston, MA.I understand that for CCRA I am a "resident" even if I stay here for morethan 6 mo (I own a house in Toronto, have an RRSP).I am here on a 1099. How can I minimize the amount of tax paid in the USand Canada? A co-worker told me that I have to pay tax quarterly in the USand I want to deduct my rent and utilities.What is your fee for filing my taxes at the end of the year?Thanks,

-----------------------------------------------------------------------------
david ingram replies:

The # 1 rule for a TN is that you can NOT be self-employed for the purposes of US Immigration.

Income Tax Does allow you to deduct necessary expenses but from your description, your rent and utilities would not be deductible because it seems that you moved to Boston to take the job.  If you were already working in New York and your New York Employer sent you to Boston for six months and you kept your home in New York, then temporary expenses for up to a year are deductible. 

However, in the case you describe, You may be living in Toronto but you took a job in Boston working for whomever obtained your TN for you.  By paying you on a 1099, that employer has saved themselves about 10% in payroll expenses because they are not paying FICA, Medicare, Employment Insurance and other benefits.

You are actually "BY LAW"  an employee without benefits.  If you chose to be paid on a 1099 basis, you have likely cost yourself a lot of money unless your employer grossed up your pay by what they would usually have to pay for payroll benefits.

Remember, your TN visa only allows you to work for 'that' employer.

If you wanted to do something for someone else, you would have to get another TN visa for that company.  It is possible to have half a dozen TN visas at the same time but you ARE an EMPLOYEE of each one.

This will NOT be what you want to hear. 

In the meantime, you will have to file a 1040 DUAL Status return with a schedule C and pay both halves of the FICA as well as Federal Tax and MA state tax and Boston.
---
At the moment, I am quoting $900 to $3,000 - You can find a better understanding of my pricing further down.

---------------
Are you sure you are not the person who wrote this other question?

QUESTION:

I have been working for a US employer with TN visa for more than a year. Now I just registered my only small business in Boston area and will have my first customer for consulting service.

Question:
1. --Am I illegal to work as self employed while keeping my TN status by working with my employer?
2. --Do I need a work authorization for me to work for myself since I know I have to have a specific TN visa for every and each employer.
3. --If the aboves do not work, do I have an alternative way to continue my business while working and living in US under TN status, such as doing the self employed business using my company registered in Ontario Canada?


Your answers are appreciated.



------------------------------------------------------------------------------------
david ingram replies;

1.    What you have set up is totally illegal and will provide Homeland Security with wonderful documentary evidence that you were working illegally when someone complains and Homeland Security is arresting you prior to deporting you.

2.    Yes, you need an E2 or E5 visa if you want to work for yourself.  The E-5 requires a $500,000 to $1,000,000 investment and you have to create jobs for and hire 10 full time employees who are NOT related to you.  Its advantage is that it gives you an instant green card.  The E-2 requires a much smaller investment (maybe as low as $35,000) but has the disadvantage that one of the terms is that you can NOT get a green card with it.

3.   Not with a Canadian company if you are working in the US. AND, if you have a Canadian corporation, be aware that you need to file US form 5471 when a taxable resident of the US with 10% or more ownership of a foreign company in any country, Canada, China, India, Pakistan, Spain, etc, etc.  Look up the form AND instructions at www.irs.gov.  read the penalty for failure to file in the instructions.

4.   However, all is not lost.  You CAN have MORE than one TN as you seem to realize.  I have seen eight issued in the same year for the same person for eight different US employers for consulting and or engineering jobs.  However, you MUST be an employee (part time is fine) of each person  paying you because one of the terms of the TN visa is that you can NOT be self employed.  And, a;though it seems a contradiction, you can be paid on a 1099 basis which just means that you are an employee without benefits.
-------------------------------------------------------------------