Cross Boarder Taxation / Canadian investing in USA

[Kris Parks]

Hello Everyone,

First time posting:

My friend is a US resident that purchases and flips houses through a single member LLC (taxed as an S-Corp). In order to do a certain flip, he needs me to go in as an investor for 15% of the cost (with return of my investment + 15% of the profits). I am Canadian and concerned about getting double taxed as my return would be payed out by a US LLC and in Canada is viewed as a corporation. I'm assuming I would have to pay US tax on that profit; Canada would consider that income as an investment dividend from a US corporation, and tax me again; not allowing for any foreign tax credits.

Am I accurate in thinking that I WOULD in fact be double taxed? And if so, is there any structure we could set up that could avoid double taxation on this project?

Thanks in advance for any advice / guidance with how we should structure this.

Kris Parks

[Chad U.]

@Kris Parks

Someone asked almost the exact same question a few weeks ago.  Here was my response:

I am by no means an expert and am not a cross border legal/tax specialist. However, the easiest thing to do is likely just to have him loan the money in his own name to your LLC. When you pay out his investment and interest, you will have to issue a form 1042 from your LLC. A 1042 is issued to a non-American who receives US source income (similar to a 1099).

And here is the link to the post:

https://www.biggerpockets.com/forums/51/topics/428...