Dividends from US real Estate

Question

2840 viewsMay 31, 2021Cross Border Tax

0

Rasha (anonymous) Posted May 27, 2021

We own US property via C-corp. Both spouses have greencards but live in Canada under PR. Husband has high earning corporation. I am not working.

Instead of husband drawing a large personal salary to cover personal expenses:
1. How are the retained earnings in C-corp viewed in Canada? Any implications with CRA?
2. Can I draw personal dividends from US at low amounts (50k) and bring to Canada? What taxes will be levied if any by CRA? I also get a 40k salary from Husbands corp – will my effective salary now be 40k CAD and 50K USD dividends?
3. Property qualifies for accelerated depreciation in C-corp. If there is a CRA tax due as well, do the same depreciation limits apply with CRA? Thank you.

1 Answer

score 0 · Answer 1 · 2021-05-31T14:48:25+00:00

The income earned by your and your husband’s US C-corporation is classified as foreign accrual property income (FAPI) for Canadian tax purposes. If the corporate income tax paid (Federal + State) in the US is less than 25%, then you both will have a net income inclusion for Canadian tax purposes in respect of the FAPI earned in the year. In addition, dividends received from a US C-corporation are taxed as foreign income at ordinary tax rates in Canada. Furthermore, when computing the FAPI earned in the year, apply Canadian depreciation rates.

Dividends from US real Estate

1 Answer

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