A Note to Snowbirds – Be Aware of Financial Pitfalls

A Note to Snowbirds – Be Aware of Financial Pitfalls

Pacifica Partners’ Financial Post Weekly Column – Oct 8th 2009


As autumn steadfastly approaches, many Canadian Snowbirds begin their migration to warmer US climes. This year however, even more would-be Snowbirds are lured south on the back of a strong Canadian Dollar and from the heightened financial confidence arising from their recovering investment portfolios.

Snowbirds Flock South

Despite the newfound confidence, there are financial pitfalls that can arise if proper planning isn’t conducted prior to departing Canada. Three of the most common complications include: unintentionally being deemed a “resident alien” by the United States’ Internal Revenue Service; real-estate related tax and estate issues; and finally the complications that can arise from the often inadvertent decision of leaving Canadian investment accounts unattended.

To avoid these possible complications the following are a few items that Snowbirds should discuss with their qualified financial and tax advisors prior to heading south.

Firstly, the period of time that Snowbirds intend to spend in the US will impact whether or not they are considered a “US person” and most importantly, will dictate whether or not they are required to file US tax returns. The “substantial presence test” is used to label Snowbirds as a simple visitor to the US or a “resident alien”. But what is often unknown to Snowbirds is that the test is not based on the time they spend in the US in the current year, but the past three years.

As a rule of thumb, if a Snowbird consistently spends less than 120 days per year, they would not be deemed a US person and would not be required to file US tax returns. But Snowbirds should be aware that every trip or summer vacation into the US will also count in assessing someone as being a “resident alien,” even a short day-trip.

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Pacifica Partners are weekly columnists for the Financial Post

Legal Disclaimer

This report is for information purposes only and is neither a solicitation for the purchase of securities nor an offer of securities. The information contained in this report has been compiled from sources we believe to be reliable, however, we make no guarantee, representation or warranty, expressed or implied, as to such information’s accuracy or completeness. All opinions and estimates contained in this report, whether or not our own, are based on assumptions we believe to be reasonable as of the date of the report and are subject to change without notice. Past performance is not indicative of future performance. Please note that, as at the date of this report, our firm may hold positions in some of the companies mentioned.

Copyright (C) 2009 Pacifica Partners Inc. All rights reserved.

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