BACKGROUND: I am a US citizen, my wife will be a US citizen April of
2008 and afterwords we are looking to move to Canada to pursue dual
citizenship.  We are contemplating the purchase of a condo in downtown
Vancouver, BC that is a 'live/work' property and won't be ready to
move in until March 2008.  As we are self employed, we thought it
might be a wise investment as the location and price are right. We
have two years to decide to A. move ourselves and our business into
the condo.  B. lease the condo to a business.  C. rent the condo as an
apartment.  We alo have a house in the US and are intent on renting it
out as an investment property at the time of our move to Canada...this
is all dependant on how well our business is doing in a couple of
years..

QUESTIONS:

1. As US citizen with a business in the US, what taxes do we pay to
the Canadian government on rental income from our Vancouver condo if
we were renting it as a business? As an apartment? Will we be taxed
again by the US government on this income?

2. I have heard of a 25% witholding tax from the Canadian Government
on rental income...if this is true? How long is it held and is some
part returned?

3. What would we pay in taxes if we sold the property?

4. If we move into the property with our US business, are we able to
write off part or all of the mortgage on this property as it is
considered a live/work space?

5. Since most of our business will still be coming from the US, I'm
assuming it would be smarter to keep the business as a US business or
is it better tax wise to become a Canadian business (lower tax
brackets or higher)?

6. Any other considerations for avoiding double taxation in this scenario?

Based on what i know (my field of study):
1. Whether rent as an appartment or a business will not change the
amount of taxe u pay in Canada. Besides, as US citizens you are taxed
on your worldwide income, but u'll get a deduction for that amount
when u file your US income tax, since you'll already have paid the tax
on your revenues in Canada. (tax treaty).
2. Never heard of that. Probably not true, since you are responsible
of declaring rental income you make. So the gov cannot withold tax
since they don't know what you've earned until u declare it.
3. If the property is sold, you'll pay the tax on the capital gain,
which is only 50% taxable in Canada. For exemple: You buy the property
for 200K, sell for 300K. The capital gain is 100K. However only 50% of
that amount is included in your revenue of the same fiscal year,
therefore paying tax only on 50K, according the the tax bracket.
(you'll end up paying 50K x tax bracket).
Keep in mind that in Canada, you dont pay any tax when selling your
primary house. (ie the one you live in right before selling it), but
in your case, since you earn income from that condo and are allowed to
deduct expenses, it is not considered as a "primary house", and you'll
end up paying tax as i explained above.
4. You'll only be allowed to write off the equivalent of the space u
use as an office. For exemple, if u use only 30% of the condo as an
office, you'll only be able to deduct 30% of your expenses (mortgages,
power, phone bills...)
5. Canadian tax brackets are much more higher than the US
counterparts. But the thing is you'll pay canadians taxes on all
originated from the condo in BC. Indeed it doesnt matter where your
customers are from, but where the transaction is held. (in this case,
Canada).
6. You dont need to try "avoiding" double taxation since there is a
tax treaty between US and Canada. Any tax paid in one country won't be
taxed twice in the other.

Hope this has helped!