C-Corp for a Canadian long-term investor?

Question

Hello everyone,I have a C-corp in the state of Ohio, at the advice of a real estate 'guru'

At the moment, I am JVing on a long-term property in Pittsburgh. Is it worthwhile to hold the property in my C-corp? At the moment the corp has been sitting idle.

Priorities:

• establishing credit, history in the USA, with plans for more long-term investments
• not getting taxed as much as possible (I will be in the 15% corp tax bracket to begin)

What I Know:

• C-corp has double-taxation - I don't plan to withdraw the revenue from the property so I'm not too concerned with this
• S-corp and LLC passes through to the individual
• I am not eligible for an S-Corp

What I Don't Know:

• in what respects are C-corps good for international investors?
• would the following structure work?:

My C-Corp owns a % stake in ---> LLC (split ownership between 3 Canadian JV partners) which is the registered owner of ---> Property

I have reached out to a CPA already, but the deal has sprung up last minute, and I would like to capitalize on the existing company already in the US if possible.

Thanks in advance!

Cameron

Tony Wu · Answer

Cameron,

For Canadian taxpayers, there is a potential risk of foreign tax credit being denied on the CA tax return, if a flow through entity (such as US LLCs) are used. If operate via flow through in the US, you will then be required to report effectively connected income on your US income tax return, while the denial of foreign tax credit adds to your overall tax cost.

Cameron Andrews · Answer

@Roy N. Thanks for the input. I'm actually from Toronto, happen to live in London at the moment though.

I will update this post as I learn more through the CPA and experience of trying it out.

Cameron

Roy N. · Answer

Cameron:

A corporate entity may not result in the double taxation you think.

One advantage of having a U.S. corporate entity, at least for your Canadian partners, is it affords control over when you repatriate retained earnings ... until then, after the corporation pays its tax, you can reinvest the funds in the U.S.A. without being taxed at home.

I'm not familiar with the tax treaty between GB and the U.S.A., not HMR's view on world income - that's where your CPA comes in - but I would anticipate a similar arrangement.

C-Corp for a Canadian long-term investor?

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