Canadian residents residing in the U.S. were liable for Canadian tax.

• Author: Zink, William

Canada's Tax Court has found that Canadian citizens who resided in the U.S. for a three-year period remained Canadian residents for tax purposes during that time, and were thus liable for tax on income.

Hun Huh and Chung Huh, husband and wife, along with their children, emigrated to Canada from Korea in 1978. They became citizens in 1980. The Huhs maintained a business (which they operated as partners), owned a home, filed income tax returns that indicated that they were residents of Ontario, and were very active in a church located in Toronto.

In 1987, the Huhs sold their residence and went to the U.S. with the pastor of their church (so that they could remain under his teaching). While in the U.S., the Huhs did nothing to change their residential status. They did not apply for green cards or U.S. citizenship, nor did they file U.S. income tax returns. Their sons attended high school in the U.S. and the family lived in rented accommodations. They did, however, file T1 tax returns for 1991 and 1992, and Chung Huh filed a Canadian tax return for 1993, all of which indicated that they were residents of Ontario and self-employed during the years in question. They remained in the U.S. for several years, then returned to Canada.

The minister of national revenue increased the Huhs' incomes, imposed penalties under the Canadian Income Tax Act and assessed contributions on self-employed earnings in accordance with the Canada Pension Plan. The Huhs appealed on the grounds that they were not resident in Canada during the relevant tax years.

The court found that the Huhs had many more ties to Canada during that period than they had to the U.S. It concluded that they did not establish residency in the U.S., but remained there as visitors. Moreover, even if the Huhs had actually become U.S. residents during the relevant period, the Canada-U.S. tax treaty would nonetheless categorize them as Canadian residents for income tax purposes, as they retained a residence in Canada that would be a permanent home available to both of them.

The question of residency depends on the specific facts. The following is a list of some of the indicia relevant in determining whether an individual is resident in Canada for Canadian income tax purposes. No one item or any group of two or three items establishes that an individual is a resident of a country or countries. However, a number of factors considered together could establish that the individual is a Canadian resident...