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Arthur Rubin
Arthur Rubin, Tax Preparer
Category: Tax
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Experience:  22 years of tax preparation experience, including individual, trust, and estate returns.
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As a Canadian real estate investor how do I apply for a taxpayer

Customer Question

As a Canadian real estate investor how do I apply for a taxpayer identification number?
Thank-you
Submitted: 9 months ago.
Category: Tax
Expert:  Phillip B, EA replied 9 months ago.
Thanks for using JustAnswer.com! I will do my best to provide you with a clear and concise answer to your tax question based on the information that you have provided.

You can get a Canadian Business, Corporate Income Tax, GST/HST, Payroll, and Import/export numbers online at this website: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/bn-ne/bro-ide/menu-eng.html
Customer: replied 9 months ago.
Relist: Inaccurate answer.
The suggested site is for investing in Canada and not the Unites States. This is what I think any-way. I am a Canadian and want to invest in US real estate.
Expert:  Arthur Rubin replied 9 months ago.

I'm sorry the previous expert was unable to answer your question.

I am assuming you are an individual investor, and do not set up a structure recognized as a separate entity in the US (partnership, trust, corporation).

If the property is income-producing, you can file a form W-7, requesting an ITIN, and use checkmarks (a), (h), and, on the line (h), specifying the treaty provision, which I am unable to locate at the moment. The treaty does provide for a waiver of the otherwise-required withholding of 30% of rent and 10% of gross sales. It may be adequate to provide the meaning of the provision rather than quoting the specific treaty provision.

Once you have your ITIN, you can provide a W-8BEN or W-8ECI to your renters. (The W-8ECI instructions state that rent is not normally ECI (effectively connected income), but the W-8BEN instructions say that it is.) (Added:) I found some further IRS clarification on the issue. If you are a passive investor, and the renter pays all taxes, mortgage, and repairs, then it is a passive investment subject to W-8BEN rules. IF you are actively managing the property, or if you elect to declare it, on form W-8ECI, then it is ECI. In any case, expenses can only be deducted on form 1040NR (with 1040 Schedule E).

If the property is not income-producing, you can not use provision (a) of form W-7, so you must wait until a pending sale in order to file form W-7 before a required tax return.

Alternatively, if you are willing to be overwithheld for the first year or two of operation, you can file form W-7 (checking (b)) with your first 1040NR.

Note that, if you are a Canadian resident, and so taxable in Canada on your world-wide income, you can file for the foreign tax credit on your Canadian return, based on the amount of tax paid to the US.

 

I'm going to be offline for much of the next 12 hours; if you need clarification, please be patient.

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