The first fourteen posts in my “transition tax” series were:
Part 1: Responding to The Section 965 “transition tax”: “Resistance is futile” but “Compliance is impossible”
Part 2: Responding to The Section 965 “transition tax”: Is “resistance futile”? The possible use of the Canada U.S. tax treaty to defeat the “transition tax”
Part 3: Responding to the Sec. 965 “transition tax”: They hate you for (and want) your pensions!
Part 6: Responding to the Sec. 965 “transition tax”: A “reprieve” until June 15, 2018
Part 9: Responding to the Sec. 965 “transition tax”: From the “Pax Americana” to the “Tax Americana”
Part 13 – Calculating the Transition Tax: Just Like Dental Work – Painful in More Ways Than One
The Canadian Media Takes Notice …
Veteran CBC Reporter Elizabeth Thompson has written an informative series of posts about the impact of the “transition tax” on Canadian residents. I am not going to reproduce the posts. I am going to include a series of tweets that link to both the original CBC site and the Isaac Brock Society. You should read her articles, the Brock posts, the comments on both sites and compare the comments to each.
Ms. Thompson’s articles were well written and explained the mechanics of the “transition tax” well. Nevertheless, the comments on the CBC site revealed that it was very difficult for readers to understand what is going on. For each of her articles I left a comments that I hoped would help readers better understand the problem. One example was:
This is a complex problem – in the spirit of helping people understand the context and unfairness of this, here is a summary of what is going on:
1. A Canadian resident individual creates a Canadian Controlled Private Corp.
2. That CDN corp may make some profits.
3. If those profits are paid out to the individual, the individual pays taxes on his personal tax return (wherever he is required to file a return).
4. If the profits earned by the Corp are not paid out to the individual they are (1) taxed to the corp in Canada. The “after tax money” remains in the corp for future investment, or to be distributed to the individual later. Note that in Canada the money is not taxed to the individual until the money is distributed to the individual.
5. Canadians with U.S. citizenship also have to file U.S. tax returns. Those returns disclose existence of the CCPC and the amount of earnings that have not been paid out by the corp.
6. Money left in the corp (to be distributed later) was fully disclosed to the USA, but was NOT subject to US tax when earned. I repeat it was NOT (under US law subject to taxation when it was earned).
7. USA is claiming the right to (1) impose tax on money earned by the corp by (2) pretending that the money was actually earned by the individual (who never received it) – creating fake income!
8. Therefore, this is about (1) the USA imposing retroactive tax on (2) money that was not subject to U.S. tax when earned (3) by pretending that the money was distributed to the CDN shareholder (4) when the money was not distributed.
9. It will expose the individual to double tax in the USA and Canada.
USA is (1) creating fake income (2) imposing real taxation on fake income (3) imposing taxes before Canada can tax it and (4) stealing from Canada.
I don’t think my attempts to explain this did any good.
Ms. Thompson’s articles included:
April 30, 2018
#Trump tax reform hitting thousands of Canadian residents with massive tax bills https://t.co/0zcd01OEto #cdnpoli #lpc #cpc #ndp #TaxReform
— Elizabeth Thompson (@LizT1) April 30, 2018
Be on the Lookout! Bubblebustin to be on CBC The National- on the #TransitionTax https://t.co/xzK9dy2KTA
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) September 3, 2018
May 2, 2018
Trudeau government should help those hit by #Trump #tax say MPs @MurrayRankin and @PatKelly_MP https://t.co/JxrapDuTq4 #cdnpoli #TaxReform #taxes
— Elizabeth Thompson (@LizT1) May 2, 2018
Brock project: Advice on how to explain the effects of the @USTransitionTax through a question in the House of Com… https://t.co/cOQUmPPV26
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) September 3, 2018
June 13, 2018
Thousands of Canadian residents hit by #Trump #tax get temporary reprieve as battle begins for permanent fix https://t.co/j379IO5RPm #cdnpoli #IRS #TaxReform
— Elizabeth Thompson (@LizT1) June 13, 2018
First a delay in payment – Is it possible that a legislative fix to the "transition tax" is in the works? https://t.co/6eUJHP1Reu
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) September 3, 2018
August 13, 2018
Canadian residents hit by Trump repatriation tax dealt a new blow https://t.co/67uLAfhGkh #cdnpoli #tax #TaxReform
— Elizabeth Thompson (@LizT1) August 13, 2018
Another article by @LizT1 about the @USTransitionTax – Just when you thought it couldn't get worse! https://t.co/rbeE7iYtbe
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) September 3, 2018
August 14, 2018
Canada has raised the issue of the impact of the repatriation tax on Canadian residents with the U.S. government, says Finance Minister Bill Morneau https://t.co/1s3puNhyyI #cdnpoli #tax #repatriationtax #taxreform #politics
— Elizabeth Thompson (@LizT1) August 14, 2018
More about the @USTransitionTax issue from @LizT1: Finance Minister Morneau responds (sort of) https://t.co/Nls6MvPU9V
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) September 3, 2018
John Richardson – Follow me on Twitter @Expatriationlaw