Canada-U.S. Estate and Gift Tax Planning: Utilizing Canada-U.S. Income Tax Treaty Provisions to Mitigate Tax

Although there is no inheritance tax in Canada, taxes on income and capital gains are generally required to be paid at death, on gifting, and transfers to trusts. There are exemptions to mitigate these taxes, including an exemption for a principal residence and a lifetime capital gains exemption, $971,190 (2023), for qualifying property. Unlike many other countries, there is no Canada-U.S. Estate and Gift Tax Treaty. Instead, there are provisions in the Canada-U.S. Income Tax Treaty to mitigate double taxation on death for Canadian citizens residing in the U.S.

A Canadian resident is subject to U.S. estate tax on U.S. situs property, including U.S. real estate and stock owned in U.S. corporations. Under the income tax treaty, a Canadian resident is entitled to a pro-rata share of the U.S. unified credit calculated as a ratio of the deceased's U.S. assets over worldwide assets. In addition to the unified credit, a marital estate tax credit and the foreign tax credit are available to offset taxes payable or paid.

Tax practitioners working with taxpayers residing in both the U.S. and Canada need to take steps to circumvent and reduce transfer taxes paid by these taxpayers.

Listen as our astute panel of international tax planning experts explains estate and gift tax considerations in the U.S. and Canada for Canadians residing in the United States.

1. Canada-U.S. Taxes on Transfers on Death and During Lifetime: introduction
2. Residency
3. Unified credit
4. Marital credit
5. Foreign tax credit
6. State estate tax
7. Canada-U.S. Income Tax Treaty
8. Strategies to mitigate transfer taxes

The panel will cover these and other critical issues:

• When and how U.S. gift and estate taxes are applied to Canadian residents
• Using the Treaty marital credit to reduce estate taxes
• Specific strategies to reduce overall transfer taxes paid to the U.S. and Canada
• How Canadian residents can utilize the U.S. unified credit

Learning Objectives

After completing this course, you will be able to:

• Identify specific provisions in the Canada-U.S. Income Tax Treaty that can apply to estate taxation
• Determine how U.S. residency affects estate taxation
• Decide how the foreign tax credit is used to mitigate transfer taxes
• Ascertain differences between Canadian and U.S. taxation of assets held at death

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of international taxation including residency determination, foreign entity classifications, application of treaty benefits, as well as GILTI, Subpart F, and the related Section 250 deductions.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).