Dale Walters is a partner and CEO of KeatsConnelly. Serving clients for over thirty years, Dale was twice named one of the top financial advisors in the US by Mutual Fund Magazine, and has led the firm to numerous awards, including being named one of Arizona's Most Admired Companies, Phoenix Chamber's Impact award for Company Culture, the Alfred P. Sloan award for Workplace Flexibility and the Better Business Bureau award for Ethics. He is a frequent speaker on US-Canada financial planning and tax related issues, and is the author of Buying Real Estate in the US GÇô The Concise Guide for Canadians and co-author of Taxation of Canadians in America: Are You at Risk? Dale is a former four-time World Heavyweight Karate Champion and fourth degree black belt in Judo.
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
