Planning strategies for owning U.S. assets or operating a business in the U.S. Presented by Brent Hoshizaki, CPA, CA, CPA (Washington), Sheryne Mecklai, CPA, CA, Noriko Tunnah, US CPA (New Hampshire) - with Manning Elliott LLP

1. Investing in the US
1 of 21
Presented by:
Brent Hoshizaki, CPA,CA, CPA (Washington)
Sheryne Mecklai, CPA, CA
Noriko Tunnah, US CPA (New Hampshire)
November 19, 2014

2. Agenda
1. Tax Environment
2. Estate Tax
3. Investing in US Real Estate
2 of 21
Vacation
Rental
4. Investing in US Businesses
5. FATCA

3. 3 of 21
Individual Taxation
within a Jurisdiction
Canada – Residency
US – Citizenship
Eritrea

4. 4 of 21
US vs. Canadian
Tax Rates
Corporate
Personal

5. • Tim Hortons/Burger King
• Obama “unpatriotic tax loophole”
• Expatriated US entity (“change of address”)
• If inversion rules apply new foreign parent is
treated as a US domestic corporation
• RTO situations as an example
5 of 21
Corporate Inversions

6. 6 of 21
US Estate Tax
US citizen
Green-card holder
Canadian Resident
Non-US citizen
Non resident alien (“NRA”)
Levied on Worldwide property US situs assets - includes:
Real estate
US company shares
Exemption $5.34m per US person (2014) US estate tax reduced by treaty credit
which is a proportioned unified credit
US assets x $2.08M (2014)
Worldwide assets
Spouse Port unused portion to US
citizen surviving spouse
No ability to transfer unused spousal
amount.
Marital credit equal to lesser of estate
tax or proportioned unified credit

7. 7 of 21
Forms of Ownership
Personal
Corporation
Personal Trusts
Partnership
LLCs
ULCs
REIT

8. 8 of 21
US Vacation Real
Estate
CORP Trust
LP
LLC
! !

9. 9 of 21
US Rental Real
Estate
CORP Trust
LP
LLC
! !

10. 10 of 21
Am I doing business
in the US?
Sourcing
Goods
Services
Permanent establishment (Treaty)
Nexus (State)

11. 11 of 21
US Business
CORP
LP
LLC
CORP
US
OPS
US
OPS
CORP
US
OPS
CORP
CORP

12. 12 of 21
US Business – Sole
Proprietor
US
OPS
US Sourced Income
Total US Tax
Canadian Tax
Foreign Tax Credit
Total Canadian Tax
Total Income
Total Tax (sum of A)
Fully Distributed Funds
Effective Tax Rate
$100
(35)
(45)
35
(10)
100
(45)
$55
45%
A
A

13. 13 of 21
US Business-
Partnership
LP
US
OPS
US Sourced Income
Total US Tax
Canadian Tax
Foreign Tax Credit
Total Canadian Tax
Total Income
Total Tax (sum of A)
Fully Distributed Funds
Effective Tax Rate
100
(35)
(45)
35
(10)
100
(45)
55
45%
A
A
GP

14. 14 of 21
US Business – US
Branch
CORP
US
OPS
US Sourced Income 100a
US Corp Income Tax (35)
US Corp Branch Tax (3)
Total US Tax (38) A
Canadian Corp Income Tax (25)
Canadian Corp Foreign Tax Credit 25a
Total Canadian Corporate Tax 0a A
Dividends to Individual 62a
Total Canadian Personal Tax (18) A

15. 15 of 21
US Business – US
Branch cont’d
CORP
US
OPS
Total Income $100a
Total Canadian and US Tax (sum of A) (56)
Fully Distributed Funds $ 44a
Effective Tax Rate 56%

16. 16 of 21
US Business – US
Subsidiary
CORP
CORP
US Sourced Income 100a
US Corp Income Tax (35)
US Withholding Tax (3)
Total US Tax (38) A
Dividends to Cdn Corp 65a
Dividend Deduction (65)
Canadian Taxable Income 0a
Cdn Corp Income Tax 0a
Total Canadian Corporate Tax 0a A
Dividends to Individual 62a
Total Canadian Personal Tax (18) A

17. 17 of 21
US Business – US
Subsidiary cont’d
CORP
CORP
Total Income $100a
Total Canadian and US Tax (sum of A) (56)
Fully Distributed Funds $ 44a
Effective Tax Rate 56%

18. CORP
CORP
18 of 21
US Business - LLC
LLC
CORP
LLC
LLC

19. 19 of 21
FATCA: Foreign Account
Tax Compliance Act
US law requiring reporting by:
US taxpayers for specified foreign financial assets
Non-US financial institutions for financial accounts held by:
US taxpayers
Foreign entities where US taxpayers hold substantial
ownership
Does not replace FBAR reporting
Exempt accounts: RRSP, RRIF, RDSP, TFSA
Started July 1, 2014

20. FATCA cont’d
Canada signed a Model 1 Intergovernmental
20 of 21
Agreement (“IGA”) on Feb 5, 2014
Canadian financial institutions CRA IRS
US financial institutions IRS CRA
Penalty for not complying: 30% withholding

21. 21 of 21
Questions???