I bought rental properties through an LLC with 3 Americans and 1 other Canadian, but I recently discovered that by doing so , I’ll be taxed twice. Can I fix that? By adding making an LP for myself and adding it to the LLC?
How To avoid double tax issue When investing in the us as a canadiam
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Yes, you will be double taxed. This is because the IRS treats a multi-member LLC as a Partnership whereas the CRA treats an LLC as a corporation. The CRA will tax distributions received by you from the LLC and the foreign tax credit allowed will be limited to 15% of the distributions received. Consider transferring your units in the LLC to a newly created US Limited Partnership. A US LP is treated as a partnership (pass through entity) for both US and Canadian tax purposes. You may have to pay capital gains tax on the transfer of your LLC units if the properties increased in value from the date of purchase.
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