One point made by the article author indicates that estate
planning is a concern when owning real estate in the United States,
and that "it's a good idea to get advice from a specialist
in cross-border taxation before proceeding."
We showed the article to our very own Frank Casciaro, Fuller
Landau's Senior Tax Manager with a specialty in cross-border
taxation, to get his take on Gordon Pape's comments.
Frank told us:
Further to the author's comments, the U.S. estate tax return
must be filed if a Canadian dies with American assets worth more
than $60,000. However, if worldwide assets are less than $5.43
million, your estate will likely not have to pay any estate
What the author does not elaborate on is if you are a U.S.
citizen or U.S. resident and you're subject to estate tax, you
get the full $5.43 million exemption. But for a Canadian living in
Canada and owning a vacation home in the United States, you do not
get the full $5.43 million exemption; you get a prorated
The IRS looks at the value of your U.S. property, say your
Florida condo, over the value of your worldwide estate. And that
proration is what is applied against the exemption. Therefore,
depending on the value of your U.S. property and your worldwide
estate, , you might still be subject to the U.S. Estate Tax.
Length of Stay Restrictions
One of the other challenges to spending time enjoying your U.S.
vacation home is time or length of stay restrictions. You are not
supposed to spend 183 days or more a year in the U.S., or else you
can be considered a resident in that country for tax purposes. But
it's not that straightforward either. The IRS has a complex
formula to total the number of days you have been in the U.S.,
spread over three years.
If you have 183 days or more in a current year, you could be
considered a resident of the U.S. under their own domestic rules.
If you're less than 183 days in a current year but have or are
over 183 days over a three year period, then they use the
"Substantial Presence Test" to determine if you are
a U.S. tax resident. The test is based on the following formula:
the current year's number of days in the U.S. + 1/3 of the last
year's days + 1/6 of the days from the year before that. If
with that formula you are 183 days or over, then you are still
considered a resident of the U.S.
If you are a Canadian who spends a fair amount of time in the
United States, or owns property in the U.S., it is worthwhile to
speak to a cross-border specialist to ensure that you are compliant
with the IRS from a reporting requirement. You want to be sure you
take the necessary steps so the IRS does not come knocking on your
Regardless if you are spending a fair amount of time in the U.S.
on vacation (owning property is incidental), you are going to
school in the U.S. or you are working there for any length of time,
you must file something with the IRS whether it's a tax return,
a disclosure form or a treaty exemption. The IRS loves
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