What is a US Situs Asset?
By Matt Wolch
February 23, 2017
WHAT IS A US SITUS ASSET?
For most Canadian tax residents, the US estate tax regime only applies to their US situs assets. This begs the question: what is a US situs asset?
Generally, a US situs asset is property located in or having a connection to the US, including the following:
- Real property located in the US;
- Shares of US publicly traded companies (even if owned inside a Canadian RRSP);
- Shares of US private companies;
- Cash accounts with US brokerage firms;
- Tangible personal property located in the US with some degree of permanence; and
- Certain debts owing by a US debtor.
Other assets having a US connection do not qualify as US situs assets for US estate tax purposes, such as the below:
- US bank deposits not effectively connected with a business in the US;
- Canadian mutual funds holding US securities; and
- US treasury securities.
Given that US estate tax applies at graduated rates of up to 40%, it’s important that Canadians are aware of their US situs assets and estate planning tools that can eliminate or mitigate US estate tax exposure.
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