If you are interested in owning US property, Buying Real Estate in the US: A Guide for Canadians will help you navigate the daunting legal and tax issues surrounding buying US real estate as a foreign buyer.
This book will guide you on a safer, clearer, and more economical path to reaching your goal of owning US real estate, while avoiding the possible severe tax consequences and the many other complications that may arise in the process.
The author covers information crucial for Canadian snowbirds becoming US property owners, such as:
· The opportunity
· How to own the property
· US withholding tax
· Nonresident US estate tax
· Income tax consequences
If you find yourself more confused than certain when thinking about these issues, this book will empower you to become a confident and well-informed buyer, ready to face the US real estate market. The author explains what you need to know, from the lucrative opportunities of investing in US property, to specific tax filing requirements.
Use the comprehensive and practical information in this book to ensure you experience the enjoyment rather than the hassle of becoming a US property owner.
Acknowledgments ix
Introduction xi
1 Why the US? 1
1. US Housing Appears to Be a Bargain 2
2. Short Sales and Foreclosures 3
2.1 The traditional sale 3
2.2 The short sale 4
2.3 Foreclosure or bank-owned property 6
3. Currency 6
4. Before You Get Started 7
2 Forms of Real Estate Ownership and Factors
to Consider when Choosing 9
1. Types of Ownership 10
Contents
iv Buying real estate in the US
1.1 Direct ownership 10
1.2 Indirect ownership 17
2. Protecting Your Assets 18
2.1 US homestead exemptions 18
3. Pros and Cons of Different Entities (As It Relates
to Canadians Buying US Real Estate) 19
3.1 Canadian entities 22
3.2 US entities 25
4. Owning Multiple US Properties 29
5. Investors with Worldwide Assets Greater Than
the US Exemption Amount 31
3 Income Taxes 35
1. The Basics 35
2. Rental Income 37
2.1 Rental income under direct ownership 37
2.2 Rental income under indirect ownership 44
3. Frequently Overlooked Deductions 54
4. Taxes on Selling the Property 55
4.1 State income taxes 58
4.2 Canadian filing requirements 58
4 Nonresident US Estate Tax and Probate 73
1. Green Card Holders 74
2. As a Nonresident, When Are You Subject to
US Estate Tax? 75
2.1 The US-Canada Tax Convention (Treaty)
Article XXIX B (Taxes Imposed by
Reason of Death) 77
2.2 How the US nonresident estate tax works 85
3. A Dollar Is Not Always a Dollar 88
Contents v
4. Probate 94
4.1 State-specific rules of probate 95
5 Other Things You Need to Know 97
1. Other Filing Requirements 98
1.1 Department of Commerce filing requirements 98
2. Other filings 103
2.1 California Proposition 104
3. Overview of Issues That May Come Up in the
Buying Process 106
3.1 Title insurance 106
3.2 Finding a real estate agent 107
3.3 Closing costs 108
3.4 US mortgages 108
3.5 Foreign currency 109
4. Hiring a Property Manager 110
4.1 Tenant rights laws 111
5. Alberta Reciprocal Enforcement of Judgments Act
and Other Reciprocal Laws 112
Conclusion 113
Appendix I: Checklist for Buying Real Estate in the US 115
Appendix II: Resources 117
About the Author 121
Figures
1. Basic Decision Tree 30
1. Two-Tiered Limited Partnership 35
vi Buying real estate in the US
Samples
1. US Nonresident Alien Income Tax Return
(Form 1040NR) 39
2. Certificate of Foreign Person’s Claim That Income Is
Effectively Connected With the Conduct of a Trade
or Business in the United States (Form W-8ECI) 45
3. Application for IRS Individual Taxpayer
Identification Number (Form W-7) 46
4. Schedule K-1 (Form 1065) 53
5. Application for Withholding Certificate for
Dispositions by Foreign Persons of US Real
Property Interests (Form 8288-B) 57
6. Form T1135 63
7. Form T1134 66
8. United States Estate (and Generation-Skipping
Transfer) Tax Return (Form 706-NA) (Example 1) 86
9. Form 706-NA (Example 2) 89
10. Claim for Exemption (Form BE-15) 99
Tables
1. A Comparison of Housing Costs 2
2. Canadian Dollar in US Funds (Annual Average) 8
3. States That Allow Transfer of Death (TOD), a.k.a.
Beneficiary Deed 11
4. States That Allow Ownership as Tenants by Entirety 13
5. Summary of the Pros and Cons of Ownership Types 20
6. Tax Tables 48
7. Tax Filing Requirements 60
8. Unified Estate and Gift Tax Rate Schedule 91
9. Which BE-15 Form to File 105
