Problem
Tamara Quist is a 56-year-old Canadian citizen, and the only daughter of Bob and Linda Quist. Tamara is the president and sole owner of all 100 common shares of Quist Tires ("QT"), a successful retailer of Michelin Tires located in north Toronto. Tamara's father, Bob, incorporated QT in Canada about 21 years ago. Tamara took over the business upon finishing university about 13 years ago.
Tamara lives in a downtown Toronto condominium. She owns a portfolio of stock investments of companies listed on the Toronto Stock Exchange. She also has a self-directed registered retirement savings plan (RRSP).
In January of 2020, Tamara went to the Cayman Islands for a vacation and met the man of her dreams, Frank Smeltzer. Frank, a U.S. citizen, had lived in the Caymans since 2017 when he moved there from the United States. Frank is the sole shareholder and president of a small U.S.-incorporated entity, Smeltzer Jewels (SJ). SJ distributes Colombian-purchased emeralds to U.S. jewelers. Frank's company has two employees living in New Jersey (a sales agent and a purchasing manager). The corporation is considered a resident of the United States for U.S. tax purposes. Tamara and Frank were married on the beach in the Cayman Islands on January 10, 2020 ( awfully fast wasn't it!).
Since January 15, 2020, Frank has been living with Tamara in her Toronto condominium. He had never been to Canada prior to the move. Frank set up an office in the second bedroom of the condominium and began to contribute towards the mortgage. He continued to manage SJ's business from this office, traveling to the United States and Colombia on a frequent basis and discussing operational issues with SJ's employees on a daily basis. He obtained a separate phone line and a P.O. box for the office. When in the United States, Frank stays in an apartment rented by the company in Manhattan.
Frank kept his fully furnished beachfront home and his BMW in the Caymans. When he moved to Canada, he considered selling the property. It was listed for a short time before he decided to keep it. Frank has a Cayman Island bank account, share investments, and a driver's license. In Canada, he has a chequing account and a health club membership. Frank's activities for 2020 were as follows:
|
Activity
|
Location
|
Days (including weekends)
|
|
Work from Cayman home office
Work from Cayman home office
|
Cayman Islands
Cayman Islands
|
10 (pre-January 15)
3 (post-January 15)
|
|
Work from home office
|
Canada
|
247
|
|
Vacation
|
Canada
|
24
|
|
Business trips
|
United States
|
38
|
|
Vacation
|
United States
|
5
|
|
Business trips
|
Colombia
|
20
|
|
Vacation
|
Cayman Islands
|
9
|
Tamara and Frank sold the condominium and furniture and moved to the Cayman Islands permanently on February 18, 2021. Tamara continued to manage QT from the home in the Caymans and received employment income from the company after the move. She visited the company and her parents in Canada once a month and expects to spend a total of 95 days in Canada in 2021. The directors of the company held their 2021 annual meeting in the Caymans in early May. Tamara kept a car at her parents and retained her Canadian driver's license. She closed her bank account when she left Canada and opened a new one in the Cayman Islands, but kept her RRSP and stock investments.
Task
A. Discuss Frank's Canadian residency status for tax purposes for 2020. Identify each degree of residence that could apply to him for the year and its tax consequences. In particular consider part-year, deemed resident (sojourning), and non-resident. State a conclusion once you have assessed all of the facts considered.
B. Discuss Tamara's Canadian residency status for tax purposes for 2021. Identify each degree of residence that could apply to her for the year and its tax consequences. In particular consider part-year, deemed resident (sojourning), and non-resident. State a conclusion once you have assessed all of the facts considered
C. Discuss QT's Canadian residency status for tax purposes for 2021 and its tax consequences.