Renunciation and Relinquishment of United States Citizenship: Discussion thread (Ask your questions) Part Two
Ask your questions about Renunciation and Relinquishment of United States Citizenship and Certificates of Loss of Nationality.
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NB: This discussion is a continuation of an older discussion that became too large for our software to handle well. See Renunciation and Relinquishment of United States Citizenship: Discussion thread (Ask your questions) Part One
Re; Funny how Canada just gave a couple months notice
Not funny – it’s not true that Canada just gave two months notice. March 2016 was when Global Affairs Canada and Canadian overseas missions started getting the message out on websites, news releases and emails to registered Canadians overseas. The period of leniency ended in November, i.e. 8 months later. Possibly more could have been done to get the message out; certainly more could have been done to help those whose travel plans were disrupted because they were not aware of the new rules soon enough.
Bubblebustin asks:
Personally, I can’t see how it would be ethical *if* there’s a potential for a significant tax liability. It just wouldn’t be fair for the executor to have the liability foisted on him/her should the US somehow discover that, for example, the deceased USC sold their greatly appreciated Vancouver house the year before they died (yes, I realize it’s unlikely, but it is possible).
Best case scenario might be to have the executor and the beneficiary being the same person (e.g. a son/daughter). You could then tell your executor and let him/her decide how to handle it when the time comes.
@fn0
Thanks for the correction – but the relevant part for me is that Canada is actually enforcing a ban which the US seems for whatever reason to be reluctant to do, although reports are they have increased warnings. What are they waiting for?
Telling your executor how to handle your affairs doesn’t reduce their liabilities. Seems to me you’d have to appoint someone who’s willing to ignore the US’s demands. That would involve full disclosure.
There have been incidences where estates have gone through OVDI. I’ve yet to hear of one going through a Streamlined. I suspect it’s coming though.
@Bubblebustin. Count me as one of the people who didn’t get the memo re: Canadians entering Canada on a Canadian passport. This is the first time I have heard about that. Luckily for me it will never be a problem because my Canadian passport is the only passport I use.
However it could present an awkward situation for some duals (and not just US/Canada duals) because lots of officials around the world regard possessing or traveling with more than one passport as highly suspicious activity.
As to why Canada has apparently gone hard on this issue while the US still seems to be relatively soft, I don’t know about Canada but I suspect the US guards may have been instructed to avoid creating an international incident when there is nothing to be gained by refusing to honor a Canadian passport. In spite of Trump’s bluster, the two countries are still friends and basically on the same side. Has anybody actually heard of a case where a Canadian/US dual has been denied entry to Canada when trying to enter on their US passport?
@BB
I didn’t say that one should tell the executor how to handle it. I said it would be best if the beneficiary and the executor was the same person (e.g. son, daughter). Full disclosure can be made, and the executor/beneficiary can decide whether to pay the liability or ignore it. I imagine most sons or daughters (and most folks who aren’t tax professionals of some sort) in that situation would ignore it as the money would be coming directly out of their pockets. So, you’d have done the ethical thing and the executor/beneficiary can decide how to deal with it. This contrasts with the situation where the executor is not a beneficiary. Such a person would have every incentive to pay the liability, leaving less money for the beneficiaries.
FWIW, a friend who is a tax accountant told me several years back of executors putting an estate thru Streamlined. I imagine any reputable tax/accounting professional (as was the case here) would do that.
@maz57
No one that I can recall, just hassled.
Canada has made exceptions for Canada-US dual citizens:
“Exception: If you are an American-Canadian dual citizen with a valid U.S. passport, you don’t need a Canadian passport to fly to Canada. However, you will still need to carry proper identification and meet the basic requirements to enter Canada.”
http://www.cic.gc.ca/english/visit/dual-canadian-citizens.asp
Also, “If your other citizenship is from a country whose citizens do not need a visa to enter Canada, such as the United Kingdom, France or Germany, you may be used to flying to Canada using your other passport.”
http://news.gc.ca/web/article-en.do?nid=1127209
The reason for the change?
“The policy will come into effect Sept. 30 as a final phase of Canada’s move to an electronic screening system to step up border security and boost exit control of travellers, including Canadians on government benefits.”
“What is changing is that the Government of Canada is implementing a new electronic system to assist airlines in verifying that all travellers have the appropriate documents to travel to or transit through Canada by air,” Immigration, Refugees and Citizenship Canada spokesperson Lindsay Wemp told the Star.”
Some say it’s a just a cash grab.
https://www.thestar.com/news/immigration/2016/08/18/ottawas-new-air-travel-rule-catches-dual-citizens-by-surprise.html
Odd that the cash-strapped security obsessed US hasn’t follow suit.
@tdott
That’s a very good suggestion for the reasons you’ve stated. Sorry I misread it the first time.
@maz57
The big difference between the US and Canada is Canada has a capital gain exemption on the sale of principal residences, and apparently a lot of people in Canada who weren’t actually resident in Canada were claiming to be for the purpose of selling their home in Canada.
Under CRA rules, you don’t have to claim to be a resident of Canada to get tax-exempt capital gains tax from the sale of a principal residence, just as long as the taxpayer, taxpayer’s spouse or common-law partner, or any of the taxpayer’s children has lived in the principal residence at some time during the year. There are many cases where a non-resident buys a house in Canada so their children can live there while studying at university, at the same time as making Canadian tax-free capital gains. It is only cheating if the kids or the spouse or the owner are never in the house that year. Each family can only have one principal residence, and the capital gain for periods the residence is rented out is not exempt. A Canadian taxpayer resident in Canada can designate as their principal residence any home that is inside or outside Canada, as long as it is lived in at some time during the year by someone in the family unit. So if a Canadian taxpayer has a small condo in Canada they live in most of the year and a palatial vacation home in another country, they could chose to pay tax on the condo and keep the exemption for the vacation home. Unfortunately US persons with living in Canada are screwed by the IRS because the Canadian capital gain exemption for a principal residence is not recognised by the US.
@fn0
There have been abuses. I don’t know how the government would know who’s resident or non-resident unless it tracks Canadians and permanent residents entering and exiting the country. I’m happy to see the Canadian government has tightened up its passport and tax rules to help prevent the abuse of the capital gain exemption on principal residences. The honour system wasn’t working and I’d hate for the exemption to be in jeopardy because residents and non-residents took advantage of the lack of oversight.
I am painfully aware of the capital gain associated with the sale of a principal residence in Canada for US persons, having been subjected to the tax myself. Not something that I’ll do again, but then the IRS can no longer use its element of surprise on me anymore.
You’d think with CBT, revenues would jump if the US enforced its requirement that all USC’s enter the US on a US passport, especially now that passport applicants are given notice of their US tax filing obligations.
http://www.citizenshipsolutions.ca/2016/03/30/us-passport-application-links-citizenship-statedept-to-taxation-ustreasury-to-enforce-taxation-based-citizenship/
Re: The sale of a principal residence in Canada. Although there were some CRA rules on the subject, the actual residence of a home owner was pretty much a moot point because there was no tracking; not the home sale, not the sale price, and not the official residence of the seller. It truly was an honor system and there was undoubtedly abuse because until recently the sale of a home has never even been a reportable event.
That has now changed. With all the recent furor about foreign buyers driving up home prices in the urban centers, the CRA has beefed up the system. Starting with the 2016 tax year (any sale after October 3rd) the sale of a home will now be reportable on Schedule 3. That will include the proceeds of disposition, the year of acquisition, and the address. The exemption for any gain on the sale is automatic as far as I know because they apparently make no attempt to track the cost basis. That would be a hard number to pin down for homes that have been owned for many years.
You have to wonder if this new reporting requirement is the first step of a move towards taxing the sale of a principal residence or just an attempt to crack down on abuse by foreign buyers. (Can you tell that after the events of the last few years now I don’t trust ANY government?)
These to me are steps in preserving the capital gains exemption.
If the Canadian government can’t stop the abuses, then they probably will have to eliminate it.
First of all how does one get to the last comment when there are pages and pages.
I find myself just selecting “Newer Comment” and going through page after page when I just need to get to latest and most updated comment.
Could someone please let me know what forms are required for renouncing and if DS-4079 is required.
I have noted 4080, 4081, 4082 & 4083.
Thanking you in advance for taking the time to respond.
@Tortured, either remove the /comments bit of the address or go on the righthand side of the page and find Relinquishment and Renunciation of US Citizenship in the Ask Your Questions About section and click on that. That takes you to the last entry.
You will only need DS-4080 and DS-4081. And yes, for Canada you still need the DS-4079 form – god knows why as it has nothing to do with a straightforward renunciation.
“(Can you tell that after the events of the last few years now I don’t trust ANY government?)”
Progress being made, sadly at great cost.
@ Tortured
For a post other than ones that stay in the right sidebar click on the blue “number of comments” link in the line just below the title of the post to get to the latest page of comments.
e.g.
Lynne Swanson at MapleSandbox re CBC / Elizabeth Thompson’s *Transfer of Records from CRA to IRS Doubled to 315,000*
Posted on January 29, 2017 by calgary411 Posted in Issues regarding US persons abroad 65 Comments
Click on 65 Comments.
JapanT and Maz57,
I must say that I completely echo those sentiments. I think that if we are looking to government to being the solution to our problems we will be sadly let down. It reminds me of a statement that I heard one time describing government.
“Government: If you think the problems we create are bad, just wait until you see our solutions.”
Everyone needs to tread cautiously no matter the government that we are dealing with. There is a lot of anger directed towards the US government (rightfully so, I may add), but any government that you deal with always uses the stick as opposed to the carrot. Pretty much all legislation that is written up comes with the compliance do as I say or else. You will comply or you will be fined, imprisoned or both.
Just my two cents.
Rocky
just a FYI that i just had my appointment at the Toronto consulate, and the instructions did NOT require form 4079. Being as prepared as possible to avoid any issues, I still filled it out anyway just in case. Sure enough they did Not ask for it nor ask me to fill one in, so perhaps this has changed at least for Toronto. Have to say it felt really good walking out of there, like a weight has been lifted.
a quick question though, i am unclear and from what i can tell do i only need to file form 8854 for 2017 and not a full tax return since its only one month? if I dont do taxes for 2017 would anything happen? (i never owe anything)
James. . Good question. It has been suggested that 1040 is not required if you are under the threshold for filing. Google ‘do I need to file a tax return.’
It has also been suggested that their is no need for a 1040 NR for the balance of the year if you have no US income.
As usual. The instructions are completely f****d up. As far as I can see, they tell you when and where to file if you expatriated before 2004 . For 2016 or 2017, not so good. There doesn’t appear to be any specific guidance as to whether or not a 1040 is required.
So, either file with a bunch of zeros and attach a copy of 8854 to your return and a copy marked ‘copy’ to IRS Philly or send in 8854 with a note as to why you aren’t attaching it to a 1040. Phil Hodgen would recommend the former I’m sure.
Tortured: The first place you should go is on the right-hand sidebar
@krackerjack 121
“Government, like fire, is a good servant, but a bad master. Let either once escape from the most rigorous control and its tendency is to spread in every direction and seize upon whatever it touches that can be converted into fuel to strengthen and extend it.” ” The Milwaukee Journal” of Wisconsin, 1927
Boy, hasn’t that been proven to be true.
Or my own, democracy does not have an autopilot.
Sorry I messed up the blockquotes.
I picked up the DS-4079 info here
http://www.citizenshipsolutions.ca/2016/02/17/new-instructions-to-book-canada-appointments-to-relinquish-or-renounce-us-citizenship/
so if they are finally deciding it’s not necessary for a renunciation all I can say is IT’S ABOUT BLOODY WELL TIME!
@James
Congrats!!!!!!
You’re freed!!!!
🙂