1031 exchange as a canadian

[Idontwannachooseaname]

Jurisdiction

US Federal Law

Hi guys,

I'm a Canadian citizen but I've always been jealous of all the Tax breaks real estate investors have in comparison to us. I've been wondering, if I as a Canadian citizen, I save up the down payment and buy a property in America, when the time comes, could I take advantage of the 1031 exchange and roll it into another property without having a social security number/green card?

thanks

 

[flyingron]

For what purpose are you buying the home? A 1031 exchange isn't for personal residences (or even second homes). It's only allowed on business or investment properties. But if that is the case, you can use that. You are going to need a Taxpayer Identification Number as even without the exchange, you likely will have US tax issues on US properties. Not being a citizen or LPR doesn't exclude you from the US tax system. Note there are severe limits on how you handle the rollover. Eventually, when you do cash out, you will have to pay tax on all the capital gain (and depreciation recapture). It only defers it.

 

[Tax Counsel]

Hi guys,

I'm a Canadian citizen but I've always been jealous of all the Tax breaks real estate investors have in comparison to us. I've been wondering, if I as a Canadian citizen, I save up the down payment and buy a property in America, when the time comes, could I take advantage of the 1031 exchange and roll it into another property without having a social security number/green card?

thanks

You could, and that would defer (but not eliminate) the tax on the gain for U.S. tax purposes. It must be commercial/investment property. However, Canada does not recognize 1031 exchanges and you may end up paying tax in Canada on the exchange of the property. As that gain would not occur in the same tax year as the U.S. gain, that could mean you'd end up in the end paying more tax for this, not less. There are also special withholding rules and other tax rules that apply when a foreign person owns/sells U.S. real estate.

I highly recommend you consult a Canadian tax specialist for how Canada would tax this and also consult a U.S. tax professional who does a fair number of 1031 exchanges and is familiar with (or practices with) a person who knows the rule for U.S. taxation of of foreign person so that you can find out exactly what what you'd be in for if you did it.

 

[army judge]

Hi guys,

I'm a Canadian citizen but I've always been jealous of all the Tax breaks real estate investors have in comparison to us. I've been wondering, if I as a Canadian citizen, I save up the down payment and buy a property in America, when the time comes, could I take advantage of the 1031 exchange and roll it into another property without having a social security number/green card?

thanks

In ball park numbers, how much are you thinking about investing in one of these schemes?

Before you answer, if its under $1,000,000 US Dollars, pursuing it might not be a financially sound activity.

As suggested by @Tax Counsel seeking Canadian and US Legal advice before proceeding is a very sound tactic.