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

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 for Canadian income tax purposes:

* Past and present habits of life;

* Regularity and length of visits in the jurisdiction asserting residence;

* Ties within the jurisdiction;

* Ties elsewhere;

* Permanence or purposes of stay;

* Ownership of a dwelling in Canada or rental of a dwelling on a longterm basis (e.g., a lease for one or more years);

* Residence of spouse, children and other dependent family members in a dwelling maintained by the individual in Canada;

* Membership in Canadian religious congregations, recreational and social clubs, and unions and professional organizations;

* Registration and maintenance of automobiles, boats or airplanes in Canada;

* Holding of credit cards issued by Canadian financial institutions and other commercial entities (e.g., stores and car rental agencies);

* Subscriptions to local newspapers sent to a Canadian address;

* Rental of Canadian safe-deposit or post-office box;

* Subscription for life or general insurance (including health insurance) through a Canadian insurance company;

* Mailing address in Canada;

* Telephone listing in Canada;

* Stationery, including business cards, showing a Canadian address;

* Subscriptions to magazines and other periodicals sent to a Canadian address;

* Canadian bank accounts (other than a nonresident bank account);

* Active securities accounts with Canadian brokers;

* Canadian driver's license;

* Membership in a Canadian pension plan;

* Holding directorship in Canadian corporations;

* Memberships in Canadian partnerships;

* Frequent visits to Canada for social or business purposes;

* Burial plot in Canada;

* Will preparation in Canada;

* Legal documentation indicating Canadian residence;

* Filing a Canadian income tax return as a Canadian resident;

* Ownership of a Canadian vacation property;

* Active involvement in business activities in Canada;

* Employment in Canada;

* Maintenance or storage in Canada of personal belongings (e.g., clothing, furniture and family pets);

* Obtaining landed immigrant status or appropriate work permits in Canada;

* Severing substantially all ties with the former country of residence.

Both taxpayers during the years in question were Canadian residents. Their ties to Canada far outweighed their ties to the U.S. The incorporation showed them as the owners or directors of their business. They did not demonstrate that they had personal U.S. bank accounts. They lived in rented accommodations from month to month. They did not take out medical insurance and kept their Ontario health insurance plan cards. They did not establish a doctor-patient relationship with any U.S. doctors over the period. They did not file U.S. tax returns during the period in which a U.S. resident would have been required to file a tax return by law. Their mailing address for a Canadian investment was a Canadian condominium.

FROM WILLIAM ZINK, CHICAGO, IL