Archive for North America

Canada-US Cross-Border Tax Issues When Winding-Up a Subsidiary

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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 are generally not treated as a dividend, and hence no U.S. withholding tax should apply.

Rather, such amounts would generally represent proceeds from the shares which should Read more

Holding Canadian Vacation Properties In A US Entity Avoids Exposure To Canadian Taxes On Death

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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 to tax U.S. residents on gains from the disposition of Canadian real estate is recognized in Article XIII(3) of the Canada-U.S. Tax Convention (“the Treaty”)

In addition, when a U.S. resident dies owning Canadian real estate, that individual will generally be deemed to have disposed of the property immediately before his or her death Read more

A Pitfall For Americans Using Canadian ULCs

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Unless you are very active in Canada-US cross-border tax planning, you probably are not aware of the fact that, a few years ago, 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 corporate law-they are corporations with unlimited liability. At one time, Nova Scotia was the only jurisdiction in Canada that had these entities, and they were modeled after similar entities existing under UK corporate law. However, some years ago Alberta and British Columbia jumped on the ULC bandwagon.

From a Canadian tax perspective, ULCs are taxed in the same way as “normal” Canadian Read more

Canada – A Tax Friendly Destination For Wealthy Immigrants!


Probably more than ever before, Canada is considered to be a highly desirable destination for wealthy immigrants.

Many non-tax reasons can be cited, including Canada’s:

• Healthy diverse economy
• Natural resources that are the envy of the world, including abundant supplies of fresh water, oil and gas, potash, timber and gold
• Banking system that is considered the healthiest in the world
• Stable democratic government
• Highly multi-cultural society that welcomes people of all backgrounds Read more

California “Goes Criminal” With Revenue Recovery And Collaborative Enforcement Team

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California Governor Jerry Brown signed Assembly Bill 576 into law on October 7, 2013, authorizing a pilot program to create the “Revenue Recovery and Collaborative Enforcement Team” (RRCET) consisting of an alliance primarily between the California Department of Justice (DOJ), the Franchise Tax Board (FTB), the State Board of Equalization (BOE), and the Employment Development Department (EDD) in an effort to combat “criminal tax evasion associated with the underground economy.”

In addition to the agencies listed above, the following agencies may participate in the pilot program in an advisory capacity to the team:

• California Health and Human Services Agency. Read more

“Dirty Dozen” Tax Scams 2014 – List Released By IRS

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The IRS issued its annual “DirtyDozen” list of tax scams, reminding taxpayers to use caution during tax season to protect themselves against a wide range of schemes ranging from identity theft to return preparer fraud.

The Dirty Dozen listing, compiled by the Internal Revenue Service each year, lists a variety of common scams taxpayers can encounter at any point during the year. But many of these schemes peak during filing season as people prepare their tax returns.

“Taxpayers should be on the lookout for tax scams using the IRS name,” said IRS Commissioner John Koskinen. “These schemes jump every year at tax time. Scams can be sophisticated and take many different forms. We urge people to protect themselves Read more

North Carolina Department of Revenue Launches Trust Tax Recovery Program

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On February 5, 2014, the North Carolina Department of Revenue (the “Department”) began its Trust Tax Recovery Program, which offers amnesty to qualifying companies owing collected but unpaid trust taxes. The Department describes trust taxes as those taxes paid by a customer to a seller or withheld from an employee, and held in trust by the business until filed and paid to the Department. This broad definition encompasses taxes owed on motor vehicle leases and rentals, sales and use taxes, scrap tire and white goods disposal taxes, and certain other withholdings. Also included are use taxes collected on a remote sale to an individual in North Carolina. Use tax liability for certain transactions where tax was not paid to a seller at the time of purchase is not within the definition of trust taxes, as the tax is not the possession of the seller. Read more

Israeli Bank Client Pleads Guilty to Filing False Tax Return

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The Latest in a Series of Defendants to be charged on Monday, January 14, 2013 with Concealing Accounts at Israeli Banks was a Beverly Hills resident. We originally posted The Long Arm of the IRS Reaches Israeli Shores – Oy Vey! which discussed that recent Articles about the IRS, FATCA and Israel, are proof that the IRS’ Probe into Secret Offshore Bank Accounts is not just limited to Switzerland.

Now Monajem Hakimijoo, also known as Manny Hakimi, of Beverly Hills, Calif., pleaded guilty on Feb. 13, 2014, in the U.S. District Court for the Central District of California to filing a false federal income tax return for tax year 2007, the Justice Department and Internal Revenue Service (IRS) announced Monday, February 17, 2014. Read more

Allowable Nontaxable IRA Rollovers

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Contributions Interpreted To Mean One Per Taxpayer Per Tax Year in US Tax Court Case – Bobrow v. Commissioner –

In Bobrow v. Comm’r, T.C. Memo. 2014-21, the Tax Court relied on IRC 408(d)(3)(B) regarding the limits and frequency of nontaxable rollover contributions elected by the taxpayer noting that the one-year limitation addressed in this section of the United States Tax Code applies to all IRAs maintained by the individual taxpayer.

So there you have it, as a result going forward I am now advising United States Taxpayers to engage only one IRA rollover per tax year and to be the absolute safest one rollover every 366 days.

Read more

Miami “Hookah” Takes On Florida

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Most Florida tobacco distributors are familiar with Micjo which was decided on February 1, 2012. Micjo would change the alcohol and beverage tax world in Florida forever. At issue was whether the taxpayer had to pay Florida tobacco tax on all of the invoice components, including shipping charges and federal excise tax or if the tax should only apply to the tobacco product itself, not the federal excise tax and transportation charges. For example, Micjo (or any tobacco distributor) gets an invoice from its supplier that says tobacco $100, federal excise tax $60, transportation charges $40, total invoice $200. Should the tobacco tax apply to the $200 or the $100? Of course, Florida’s Division of Alcoholic Beverages and Tobacco of the Florida Department of Business and Professional Regulation (“AB&T”) believed it was the $200 and Micjo believed it was the $100. Read more

I Hit The Jackpot! Now How Do I Get My Withholding Back?

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For Canadians gambling in United States casinos, “What happens in Vegas, doesn’t have to stay in Vegas”.

Unlike Canada, the United States considers winnings from gambling and lotteries to be taxable. Under the Tax Law jackpots of $600 or more will incur a non-resident withholding tax of 30%. So if you win $10,000 you only go back to Canada with $7000.

But as a Canadian, can you get that money back? The short answer is maybe. The US-Canada Tax Treaty allows Canadians to deduct their U.S. gambling losses (with a few exceptions) in a given year from winnings.

How do you substantiate the losses? You don’t have to submit your receipts to the IRS. Read more

Voluntary Disclosure Program for Personal Income Tax Rolls through New Jersey

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Effective December 3, 2013, New Jersey residents and non-residents may enter into a Voluntary Disclosure Agreement (“VDA”) with the New Jersey Division of Taxation (“Division”) for unfiled personal income tax. The VDA program is not available to anyone who is currently under criminal investigation, has been contacted by the Division for delinquencies or deficiencies, or is attempting to amend a previous individual return.

Requests to enter into a VDA must be in writing and contain the tax years at issue and the reason(s) for not filing. The Division reviews the VDA request and rejects or confirms the taxpayer’s request. When a taxpayer is granted a VDA, the Division waives the late filing and payment penalties for the years covered by the agreement. The taxpayer receives a 5% post amnesty penalty and must pay statutory interest. Upon completing all duties Read more