1

Ed Madro – 403 220-9654

Cross Border Tax & Estate Planning

2

This Presentation

Is provided by Investors Group Financial Services Inc. (in Quebec, a financial services firm).

Is provided by Investors Group Securities Inc. (in Quebec, firm in financial planning).

Is specifically written and published by Investors Group and intended as a general source of information only, and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide legal advice. Clients should discuss their situation with their Investors Group Consultant for advice based on their specific circumstances.

Although we have tried to ensure the accuracy of this information, tax laws change frequently so the provisions and exemptions mentioned in this presentation may change.

3

Snowbirds

Residents of Canada

• Worldwide income taxed in Canada

Not a citizen of the United States

For this presentation:

4

Canadian Images of Snowbirds

How does the Internal Revenue Service (IRS) imagine a Snowbird?

If not a US Citizen you are either:

a non-resident alien; or

a resident alien.

5

Snowbirds in the U.S.

only subject to U.S. income tax on U.S. source income

only subject to gift and estate tax on U.S. situs assets

6

Non-resident Aliens

Snowbirds in the U.S.

Subject to U.S. income tax on all sources of income worldwide

Subject to U.S. gift and estate tax on worldwide assets

Green Card Holders – deemed to be residents of the U.S.

7

Resident Aliens

8

Both countries tax worldwide income based on Residency!

Can you be considered a resident of both Canada and the United States?

Do you want to be considered a resident of more than one country?

- YES

How long can we stay?

Canadian citizens do not require a visa to enter the United States directly from Canada for the purposes of visiting.

Canadian visitors are generally granted a stay in the U.S. for up to six months at the time of entry.

Requests to extend or adjust a stay must be made prior to expiry to the U.S. Citizenship and Immigration.

A visitor who intends to live, work or study in the U.S. may be permanently barred from the U.S.

9

“I don’t live in the U.S. for more than 6 months…am I OK?”

Present in U.S. for 183 days or more in current year

• Required to file U.S. tax return (Form 1040)

• May be able to treaty tie-breaker under treaty

Present in U.S. for more than 31 days in current year and meet the Substantial Presence Test

• Required to file U.S. tax return (Form 1040) unless you can demonstrate a closer connection to Canada

10

Deemed resident if:

11

Substantial Presence Test

Calculate days spent in the U.S. as follows:

• All days in current year

• Plus 1/3 of days previous year

• Plus 1/6 of days second previous year

substantial presence exists if you stayed in the U.S. for at least 31 days in current year and for greater than 182 under the above formula

Days do not need to be consecutive and partial days count as full days

12

Deemed U.S. resident if more than 182, unless…

Year Multiplier Days Present in U.S.

Total

2012 1 120 120

2011

2010

Total

13

Deemed U.S. resident if more than 182, unless…

Year Multiplier Days Present in U.S.

Total

2012 1 120 120

2011 1/3 150 50

2010

Total

14

Deemed U.S. resident if more than 182, unless…

Year Multiplier Days Present in U.S.

Total

2012 1 120 120

2011 1/3 150 50

2010 1/6 180 30

Total 200

15

Closer Connection to Canada

Will not be deemed a US resident if:

• less than 183 days were spent in the US in the current year ; and

• “closer connection” to Canada than to the U.S. in the current year.

Closer Connection Exemption Statement for Aliens - IRS Form 8840

• Must be filed by June 15, 2013 for the 2012 taxation year

• see CRA publication “Canadian Residents Going Down South”

16

Closer Connection to Canada

Economic and Social ties must be more significant to Canada than to the U.S.

Some important ties include:

• Location of permanent home

• Location of personal belongings

• Location of family and business activities

• Location of banking relationships and investments

• Social, political, cultural or religious organizations to which taxpayer belongs

• Jurisdiction in which driver’s license held

Things to Consider

Where is my golf club membership?

Where do I attend church?

Do I need bank and credit card accounts in the US?

Should I buy and keep that luxury vehicle in the U.S.?

Have my children moved away from Canada?

Should I rent out my Canadian home?

17

18

Residence under Treaty

If fail to file Form 8840 on time, you cannot make Closer Connection claim

Only recourse is to seek a determination of residential status under Article IV of the Canada-United States Income Tax Convention

• See IRS publication 519, US Tax Guide for Aliens, and Form 8833, “Treaty-Based Return Position Disclosure Under Section 6614 or 7701(b)”

19

What if I lose my Canadian residency?

Deemed disposition of most property at fair market value

• Capital gains triggered

• Tax due with filing of tax return for year of departure

• Tax can be deferred by providing CRA sufficient security

Main exceptions

• Canadian real estate

• Registered assets (RRSPs, RRIFs, TFSAs)

• Life insurance

• Capital property used in business

20

For Non-Residents - What Assets are Subject to U.S. Estate Tax?

U.S. real estate

Shares of U.S. corporations

• even if held in accounts outside of the U.S.

• even if held in RRSPs, RRIFs & TFSA

Tangible property located in the U.S.

• including automobiles, furnishings, etc.

U.S. debt instruments (with exceptions)

What is U.S. Situs Property?

Will Rogers

“The only difference between Death and Taxes is that Death doesn’t get worse every time Congress meets!”

21