I am a UK citizen with US Green Card and own a house in Canada that was purchased in 2004. It was used by an employee of my company for a year on secondment to Canada (rent free) and, except for a few overnight stays by myself, has sat vacant ever since.
I am looking to convert the property to a rental and presume that I will have to pay change of use tax to CRA. The increase in value is around $450K.
What is the US tax situation since CRA treats it as a deemed sale though obviously there is no change in ownership - can I claim the CA taxes paid as a credit against US taxes in the year of the use change or would I have to wait until actualy selling the property?
Is there a way for a non CA resident to defer the taxes?
Changes of Use tax
Moderator: Mark T Serbinski CA CPA
There is no requirement for you to pay tax at this point. Presumably it was your principal residence until you moved to US (it cannot be after that date), and you would only pay tax when you sell it.
Formally, there is an election to make when you change use, but this is automatic.
when you sell, you will be able to count the months you used it as a prinipal residence PLUS 12, divided by the number of months you owned it, to determine the tax free portion.
But, even if it was never your principal residence, you would defer tax until selling, thus allowing for merging of US and Cdn taxes in the year of sale.
Formally, there is an election to make when you change use, but this is automatic.
when you sell, you will be able to count the months you used it as a prinipal residence PLUS 12, divided by the number of months you owned it, to determine the tax free portion.
But, even if it was never your principal residence, you would defer tax until selling, thus allowing for merging of US and Cdn taxes in the year of sale.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
Nelsona,
The house was never my principal residence. It was purchased as an investment property - I had internded to rent it out from the start, but being part of a startup business got in the way and I just did not have the time to pay attention to it. The fact that it has not seen rental income for the past 7 years led me to believe that CRA would consider sudden rental income as a change of use?
The house was never my principal residence. It was purchased as an investment property - I had internded to rent it out from the start, but being part of a startup business got in the way and I just did not have the time to pay attention to it. The fact that it has not seen rental income for the past 7 years led me to believe that CRA would consider sudden rental income as a change of use?