Category Archives: Canada/US tax issues

CANADIAN TAX ISSUES WITH CROSS-BORDER SHARE EXCHANGES

As a general rule, where a Canadian resident exchanges shares of a corporation for shares of another corporation, that exchange will constitute a “disposition” of the original shares for the purposes of the Income Tax Act (“the Act”), and the “proceeds of disposition” will be equal to the fair market value of the shares received… Continue Reading

SOUTHWARD EXPANSION CAN KO THE “CAPITAL GAINS EXEMPTION”!

Because of the vastness of the U.S. marketplace compared to the one we have in Canada, it is quite common for a successful Canadian corporation (“Canco”) to expand by setting-up operations south of the border. Usually, the natural tendency on the part of professional advisors is to recommend forming a wholly-owned U.S. subsidiary (“Usco”). Indeed,… Continue Reading

A PITFALL FOR AMERICANS USING CANADIAN ULCs

Unless you are very active in Canada-US cross-border tax planning, you probably are not aware of the fact that, some years back, the 5th Protocol to the Canada-U.S. Tax Convention (“the Treaty”) created a problem in connection with the ownership of Canadian Unlimited Liability Companies (“ULCs”) by U.S. Residents. ULCs are a strange feature of… Continue Reading

SPECIAL RULES IN THE CANADA-US TAX TREATY APPLY TO CROSS-BORDER DEATH TAX ISSUES

Canada and the United States have very different regimes for imposing taxes on death. The United States imposes a Federal Estate Tax; however, Canada has not imposed any Estate Tax since 1971. Rather, Canada taxes accrued, but unrealized, capital gains on death, as part of its income tax system. Most tax practitioners are not aware… Continue Reading

CANADA-US CROSS BORDER TAX ISSUES WHEN WINDING-UP A SUBSIDIARY

Canadian corporations form US Subsidiaries, and US Corporations form Canadian Subsidiaries, all the time. What are the cross-border tax implications when those subsidiaries are wound-up? This article will provide an overview of those implications. Winding-up a US Subsidiary (“USco”) of a Canadian Corporation (“Canco”) For US tax purposes, proceeds received on the wind-up of USco… Continue Reading

SPECIAL ELECTION FOR U.S EXPATS IN CANADA WITH S CORPORATIONS CAN AVOID DOUBLE TAX

Often, U.S. citizens who move to Canada are shareholders of U.S. S Corporations. This can potentially create double tax problems. Under Canadian tax law, the S Corporation is just like any other foreign corporation. Dividends received are generally fully taxable. In addition, if the S Corporation is a “controlled foreign affiliate”, the shareholder can be… Continue Reading

HOLDING CANADIAN VACATION PROPERTIES IN A US ENTITY AVOIDS EXPOSURE TO CANADIAN TAXES ON DEATH

Many Americans hold interests in vacation or recreational properties in Canada. Often such properties are intended to be passed on from generation to generation. Canada taxes U.S. residents on capital gains from the sale or other disposition of Canadian real estate, even if such real estate is held for recreational or vacation purposes. Canada’s ability… Continue Reading