Sell or Rent

RichC999 · Post by **RichC999** » Sat Jul 23, 2011 2:09 am

I need help deciding on whether to sell or rent our primary residency here in Canada.

We are moving (most likely permanently) to Houston Tx and we are wondering if there is a benefit (tax wise) to selling our house before we go or using it for rental.

My specific question pertains to Capital gains. If we rent our house for say a few years and later decide to sell it do we pay capital gains on the entire value of the house from when we originally purchased it or only on the amount it has grown/lost since we turned it into a rental property?

Thanks in advance,

Richard

nelsona · Post by **nelsona** » Sat Jul 23, 2011 7:04 am

In both the US and canada, the most cap gains you would pay is on the growth since departure. So, it will be important to have a FMV evaluaution done as you leave, if you decide to rent it.

IF you sell within the first year of leaving Canada, there will be no cap gains in canada, other than any CCA that you would need to recapture.

If you sell within 3 years of leving Canada, there will be no cap gains to pay in US, except for recapture of depreciation (which is mandatory on rental property for US purposes).

After those time limits, your cap gains would beging to also include the growth after leaving canada.

RichC999 · Post by **RichC999** » Sun Jul 24, 2011 10:32 pm

Thanks for the reply. So in 4 years, which country do I pay the capital gains to?

Richl

nelsona · Post by **nelsona** » Mon Jul 25, 2011 8:32 am

You will ALWAYS pay Cdn tax on Cdn real estate, regardless of where you live. It will be roughly the growth since you left, plus any CCA recapture.

You will ALSO report the post-departure gain in US, plus recapture of depreciaition. US will credit you the Cdn tax paid.