Part ownership of Canadian residence

[appelman]

A client is a Canadian citizen and US resident. He has made a partial contribution to the purchase of a condominium in Canada as a residence for his parents. If he goes on title as a part owner, I don't see any tax consequences at this time, but if the property is later sold at a profit, his share of the gain will be subject both to US and Canadian taxation, according to the US-Canada treaty. He raised the possibility of instead treating his contribution as a gift to his parents, with the understanding that if the property were sold at a profit, they would "gift" him his share of the proceeds. This strikes me as a bit devious, but the only tax consequences that I can see for him are that he would be subject to US gift tax on the initial gift. In addition, of course, his parents would pay Canadian tax on the entire gain, as well as presumably Canadian gift tax on the "regifted" share of the proceeds. Am I missing anything here?

[Gary2]

Wouldn't he be able to claim the foreign tax credit on his US return? Check the limits and specifics, but I think this is the simplest answer.

[appelman]

Yes, of course.

But the benefit would depend on his other filing circumstances.

[Davc]

That's not only "a bit devious" it's an incomplete gift and as such is considered not to have occurred for tax purposes.

[appelman]

Which part is an incomplete gift?

I'd be inclined to characterize it as a business transaction masquerading as a gift.

[Davc]

"with the understanding that if the property were sold at a profit, they would "gift" him his share of the proceeds."