Rental Property in Canada

[tacks]

Client has a rental property in Canada. It's showing a loss.

My plan was to simply transfer amounts from the Canadaian tax return to the 1040 shc E and make and adjustment for depreciation and one or two other things. (And my client pretty much instructed me to do such.)

But i don't understand how the CPA prepared it last year. None of the amounts match. Meaning that he did not use the amounts from the Canadian Tax return to do the 1040. All of them differ.

Why were the numbers different? My first guess would be cash vs accrual methods. Or is it possible that he's just that sloppy?

Is there something that i'm missing? Does this seem odd to you also?

I will, in time, mention this to the client to see if she knows anything about the discrepancies. But i'd like to get a basic understanding before calling the client. I don't want to come off as an idiot.

Any advice would be welcome. Thanks.

[Kram BergGold]

Exchange Rates

Did you account for the 2007 exchange rates?

[tacks]

Did you account for the 2007 exchange rates?

Doh!

How embarrassing. No, i did not even think of that. Thanks very much!

(The feedback from this forum truly is excellent -- very valuable.)

[Uncle]

Section 116

Client has a rental property in Canada. It's showing a loss.

My plan was to simply transfer amounts from the Canadaian tax return to the 1040 shc E and make and adjustment for depreciation and one or two other things. (And my client pretty much instructed me to do such.)

But i don't understand how the CPA prepared it last year. None of the amounts match. Meaning that he did not use the amounts from the Canadian Tax return to do the 1040. All of them differ.

Why were the numbers different? My first guess would be cash vs accrual methods. Or is it possible that he's just that sloppy?

Is there something that i'm missing? Does this seem odd to you also?

I will, in time, mention this to the client to see if she knows anything about the discrepancies. But i'd like to get a basic understanding before calling the client. I don't want to come off as an idiot.

Any advice would be welcome. Thanks.

Did the client file a Section 116 application with CRA? If not, and client is a non-resident of Canada, client is going to owe substantial Canadian tax. This is a very tricky aspect of Canadian tax law, and very few clients understand the requirements.

[tacks]

Hey Uncle,
thanks for posting
the client pays her canadian accountant to file with the Canadian Revenue Agency. I see an income tax return and lots of other stuff but not a '116.'

I'm thinking that this other accountant probably filed it. Otherwise Canadian filing requirements are somewhat out of the scope of this engagement and not something she's paying me to consider.

[Last year she got a CPA to efile her complex return for next to nothing. Call me shallow, but i question whether she slept with the guy. ]

[Burke]

Doh! How embarrassing. No, i did not even think of that. Thanks very much! (The feedback from this forum truly is excellent -- very valuable.)

Yes, since they also call their currency "dollars" it is often easy to forget that. I use www.x-rates.com and ask for historical data (by the year) which comes up monthly that I then average by 12. This gives me an average single exchange rate I can use for all the figures that I need to put on the return, since the income (and in your case, expenses) are accrued all year long.

[DonPriebe]

Client has a rental property in Canada. It's showing a loss. My plan was to simply transfer amounts from the Canadaian tax return to the 1040 shc E and make and adjustment for depreciation and one or two other things. (And my client pretty much instructed me to do such.)

I had a similar client, except his Canadian return always showed a gain while the US return showed a loss. IIRC, depreciation (Capital Cost Allowance?) is optional under Canadian law but mandatory under US law. This brought his US foreign source income to zero which resulted in no US foreign tax credit on the taxes he paid to Canada. At best they were a deduction on Schedule A.

If it matters, he was a Canadian citizen but a US resident.

[Uncle]

Section 216

I had a similar client, except his Canadian return always showed a gain while the US return showed a loss. IIRC, depreciation (Capital Cost Allowance?) is optional under Canadian law but mandatory under US law. This brought his US foreign source income to zero which resulted in no US foreign tax credit on the taxes he paid to Canada. At best they were a deduction on Schedule A.

If it matters, he was a Canadian citizen but a US resident.

If he was not a Canadian resident (and he could be a resident of both countries) and he did not file a Section 216 application, he would owe a flat 25% of gross on his rental income. CRA is being very aggressive on non-resident rentals.

[tacks]

Yes, since they also call their currency "dollars" it is often easy to forget that. I use www.x-rates.com and ask for historical data (by the year) which comes up monthly that I then average by 12. This gives me an average single exchange rate I can use for all the figures that I need to put on the return, since the income (and in your case, expenses) are accrued all year long.

Thanks for posting, Burke. That's more or less what i am doing and it's good to know that others handle it the same way.

By the way, i saw an old friend at a barbeque. I asked her how her old computer was holding up. She said it ran three times faster after we used the configuration utility. But she also said she majorly screwed up her computer after attempting this on her own. (and again, i believe that most on here could speed up their computers significantly and safely by folling the instructioins)

http://www.thetaxbook.com/forums/showthread.php?t=12166