A little while back, I wrote about my US home purchase adventure. The latest thing on the topic is that I can’t purchase the home from abroad and would have to fly to the US or get a power of attorney. Thoughts? I’m quite clueless on legal matters.
I was talking to a bank today and they stated that if I have property in the US, then I’m considered to be “taxed by the US”, which could still possibly classify me as being a “US person” even if I don’t have US citizenship and am not taxed on non-US-income, meaning that banks could still deny me banking services. I’ll have to clarify this, but it’s probably to soon in the process to get an answer. Some banks are still unsure if they will provide US persons with banking services and it is not yet established who exactly is a “US persons”.
But the Asian regulators said: “We note that the proposed definition of ‘US person’ is high-level and different from that used in other regulations. Market practitioners have also highlighted that it is not easy to identify if a counterparty is a ‘US person’.”
A Swiss businessman spends much time in the US and then automatically becomes a “US person” through his “significant presence”. He will suddenly be taxed by the US government without becoming aware of such.
Neue Zürcher Zeitung AG
*We represent a lot of Canadians purchasing US real property from Canada. I have never had a closing agent request the purchaser to: a) fly to the US to close; or b) obtain a power of attorney from an individual in the US.
To the contrary, we frequently have clients execute deeds and other closing documents here in Canada and then send them FedEx to the US. The only issue that arises is when notarizing signatures. Some states (Arizona for example) will accept a CDN notary, while other states (e.g., Hawaii and California) will not accept the CDN notary. For these states, the local Consulate will notarize the signatures.
If you were to give a US person your power of attorney, this act would be irrelevant in determining whether you were a US resident and therefore subject to US income tax and filing obligations. Residency for this purpose is based on your day-count.
US consulate offices offer notary services for a fee.
Until now, I was operating under the belief that the docs could be notarized at the consulate or embassy, but now it appears that the management at the title company is stating that they won’t accept notaries in the Switzerland since they once did a notary abroad and it took 3 weeks.
Does it make sense to give a relative in the US the power of attorney for a house purchase?
Is it true that Canadians who meets the substantial presence test can establish a ‘closer connection’ to Canada, they would be exempt from filing US taxes if they were in the US less than 182 days in that tax year?
*According to this August 27 Miami Herald article, some 31% of the real estate purchases in Miami are by foreigners. Canadians are No. 1 and Brazilians are running a close second. Only 17% of these purchases by foreigners involve financing. The vast majority – (83%) – are cash purchases. Most of the Brazilians I know of who are purchasing Miami property are buying them as vacation homes. Beach property prices in Miami are currently only a fraction of the price of similar beach property in Brazil. They have to be careful to not exceed the threshold in days per year in the US that would trigger US income taxes.
*@ Bubblebustin – your statement is correct provided: a) the form 8840 is timely filed (April 15 if reside in the US and 6/15 if reside outside of the US); b) you are not otherwise required to file US returns (e.g., US source income); and c) you haven’t applied for a green card.
Note, even if you are present in the US for more than 182 days, you can use Article IV of the US/Canada Treaty to “tie-break” your residency back to Canada (if the facts and circumstances support it). This gets you out of taxation on world-wide income, but you still have filing obligations (e.g., FBAR etc.).
@Roy, thank you. This is valuable information for regular Canadians and those of us who have CLN’s who wish to return to visit.
To make a legal document acceptable for the US, follow the Hague Convention http://en.wikipedia.org/wiki/Apostille_convention
In Switzerland, this means going to a notary, who stamps the document in witness of your signature, then going to the state chancellery (in Geneva, this used to be in the Old Town) who will affix another stamp that certifies that the notary exists. I have heard that some judges in the US don’t care if you have the apostille or not (both the notary and apostille cost money).
The US Consulate is also an option, cost may be higher or lower than the apostille option.
I think that the apostille option is valid EVERYWHERE, the US Consulate notary stamp is only valid for the US.
*Jeff, for most of the docs, I’ve been using a local notary. But to sign the closing papers, I’ll have to notarize a doc in Switzerland which will give the property management in the US the power of attorney to sign the closing documents. I could have the closing documents notarized in Switzerland by Obama, Romney and all of the leaders in the world, but the documents would still be rejected because they were signed in Switzerland rather than Puerto Rico. Makes sense? Only in the US.
@Swisspinoy Ask the local consulate if they have a copy of the State Department circular about the abolition of consular certification of legal documents. Let me look, maybe I can find a copy of that somewhere and post it here, but I’ve got to go now.
*Jeff, here is the exact wording:
So, they want me to go to the embassy in Bern to appoint the property management in the US as the power of attorney to do the closing. I would need two witnesses. Wanna be a witness? I wonder if they are trying to make it as difficult as possible just so that they can say that they made it difficult.
*Well, since they still want me to go to the embassy, I looked up the Hague convention Jeff mentioned:
*I’ll have to have this POA checked, because I don’t like the wording of it. It seems to grants to much power with no time limit:
@Swisspinoy I am not a lawyer, but no way I would sign that POA without rewriting it and making it restrictive to exactly what you want your legal representative to do.
Heck, with such a POA one could perhaps even sign you up for the OVDI Outrageously Vindictive Destroying Instrument and FuBAR penalty you out of existence LOL.
*Jeff, I hired an attorney, which was a good move. I’ll be signing a POA for the attorney using the Hague convention guidelines you provided. Neither I nor anybody in the US was aware of these. 🙂
*I’m unmotivated. I was informed by a local bank that my “US person” status would not change if I owned property in the US after renouncing US citizenship. Shortly afterwards, I got a US request for fresh bank & income statements due to expiration, which would mean more translations and signatures. Afterwards, I read Robert W. Wood‘s latest IRS threats against expats. I just feel so unmotivated to do anything. Originally, it sounded nice to buy a house to possibly retire to the US, but now I’m learning that such might make my life before retirement much more difficult and so I don’t feel like doing anything. 🙁
Robert writes that ““material economic activity” in the U.S.” makes one “high risk”.
Re: Swiss Pinoy
I don’t know if I will ever even visit the United States again, and it’s less than 100 km away. After the severe harm it has caused me and my family, I just don’t want to have anything to do with the place.
When I relinquished my citizenship in the 1970s (when they told you citizenship termination was automatic and didn’t tell you about CLNs), I liked the US lot (I’m just a one-country-at-a-time gal) and I liked it a lot until last year. Now, I think I see today’s 21st century US like those Russian expatriates from early last century viewed the USSR — they liked the Russia they grew up in, but not what it turned into. I liked the US I grew up in and that I vacationed in. Then it turned on me (and all of us in this situation) as convenient political pawns in their politics whilst we were living normal peaceful law-abiding lives in our country and disrupted my family with mega-problems that I never could have imagined.
I hope with the passing of time, I will heal from this onslaught and once again feel comfortable about visiting US because I really used to enjoy vacations there. But right now, I have no clue how long, if ever, that will take.