4. Considerations for structure
Proper and flexible structure now…
saves $ later
• Everyone is different
• Preparation and organization generate
additional savings plus helps provide security
5. What should you think about?
• Age of the investors • Value of the property
• Number of investors • Investment strategy –
• Income level of the single purchase vs.
investors multiple purchases
• Expected future • Source of funds for
appreciation of the down payment
property • Family situation
• Risk tolerance of the
investors
6. Tax and legal factors
• Legal liability issues
• Withholding tax
• Income tax
• Capital gains tax
• Estate tax issues
8. Personal ownership
Advantages Disadvantages
• Lower income and capital • Exposure to U.S. estate tax
gains tax rates as compared • Unlimited personal legal
to corporate tax rates. liability
• Easiest to setup and
administer
9. Corporate ownership
Advantages Disadvantages
• No U.S. estate tax on death. • Higher income tax rates
• Limited personal liability. • Higher capital gains taxes on
ultimate sale of property.
• State corporate income taxes
can be higher depending on
the particular state.
• Costly to setup in comparison
to personal ownership
U.S. C - corporation that is owned by a Canadian Holding Company
10. Limited Liability Partnership (“LLP”)
Advantages Disadvantages
• Income and capital gains are • Exposure to the estate tax
taxed the same as personal • More costly to setup and
ownership. administer in comparison to
• Limited Liability to the personal ownership.
individual owners.
Property owned by the LLP. The partners of the LLP are the 1%
General Partner, typically a C corporation or LLC, and the 99%
Limited Partner, the individual taxpayer.
12. Legal liability
Personal ownership Corporate ownership
• Unlimited legal liability • Limited legal liability
• Is house insurance • No protection from
adequate or enough? negligence
U.S. is a more litigious country than Canada.
Please note that we are NOT lawyers. Consult with your legal advisors for
specific details.
14. Withholding taxes
• 30% of gross rent income must be remitted to the
US Treasury Department on a monthly basis by
tenant or property if property owned by non-
resident.
• 30% withholding can be eliminated if the owners
elects to treat income as “effectively connected
income.” Income will be subject to graduated
income tax rates.
• Election made on first annual tax return.
16. Personal taxes…1
• Income and expenses are reported on a 1040NR
– U.S. Nonresident Alien Income Tax Return
– plus any applicable state and local returns.
• Personal tax returns and any income taxes owing
due April 15th of the following year.
• Canada-U.S. Tax Treaty grants
automatic two month extension until
June 15th.
– Any taxes owing still due April 15th.
17. Range of federal tax rates
> $373,000
Personal taxes…2 (35%)
• Income and expenses < $8375
will also be reported on (10%)
the taxpayer Canadian Range of state tax rates
Income Tax Return.
11%
– Foreign Tax Credit will be
available for U.S. taxes
5-9% - Majority of states
paid.
• Individual will need U.S. 0%
ITIN.
18. Corporate taxes…1
• Income and expenses are reported on Form 1120
– U.S. Corporate Income Tax Return plus any
applicable state and local returns.
• Federal Corporate tax returns due by the 15th of
the third month after fiscal year-end.
• State Corporate tax returns due by the 15th of
the third or fourth month after fiscal year-end
depending on state.
19. Corporate taxes…2
Range of federal tax rates Range of state tax rates
> $100,000
9.99%
(39%)
< $50,000
3%
(15%)
20. Capital Gains Taxes
• Personal long term (held for more than one
year) federal capital gains rates 10% to 15%,
plus applicable state tax rates.
• Corporate capital gains tax rates same as
income tax rates.
• Significant savings if investment held
personally
21. Estate tax
• Probably the most complicated tax in the U.S.
• Maximum estate tax rate is 35%.
• Non residents are taxed on their U.S. value of their U.S.
property.
• The estate tax is prorated based on the value of
taxpayers U.S. assets vs. the value of taxpayers
worldwide assets.
• Typically if the estate is setup properly, the estate tax
may not apply until the death of the surviving spouse.
23. Dube & Cuttini…
Who are we? How we can help
• Real estate investors • Save taxes
• Real estate accountants • Structure assets
• US and Canadian tax and
business advisors • Protect investments
• Working with clients across
Canada and around the world
Interested in an initial consultation?
Contact us at:
info@dubecuttini.com or 1.877.475.3823
24. Connect with us
Dube & Cuttini George & Peter
• www.dubecuttini.com • @petercuttini
• @dubecuttini • @georgeEdube
• www.georgeEdube.com
25. Disclaimer
• This presentation contains general comments and
should NOT be acted upon without the advice of a
qualified tax professional. While there may be
similarities, every situation is different.
