Sale of Canadian rental property - gain/loss??

doncraig · Joined: 14 Aug 2007 Posts: 3

We left Canada Sept 2007 with the principal residence for sale. We have a fair market value (used by CRA in their T2602 filing) of $520k. Adjusted cost base of property was around $275k. In dec 2007 we gave up selling and rented it. In Dec 2009 we sold it to the tenant for $455k.

All the proper NR6 documents were done in Canada, all good there. My concern is the US. Do I have a capital gain of $180k ($455k - $275k for these purposes, I realize depreciation factors in) or do I have a loss of $65k?

I've seen some conflicting things, in the end I am hoping the tax treaty saves my bacon here and allows the FMV of $520k at time of change in use. Any thoughts?
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DC in Boston (formerly Edmonton)

nelsona · Joined: 27 Oct 2004 Posts: 5921 Location: Nowhere, man

Your gain or loss, is based on the USD value whan you moved to US, and the selling price in USD (plus depreciation).

The gain that occured before you moved to US, since it was your principal residence, is off the table, by treaty.
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nelsona non grata... and non pro

nelsona · Joined: 27 Oct 2004 Posts: 5921 Location: Nowhere, man

remen]mber to use the exchange rates prevailing aty the time of each event (move, sale)
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nelsona non grata... and non pro

nelsona · Joined: 27 Oct 2004 Posts: 5921 Location: Nowhere, man

I presume you have been correctly filing and reporting the rental income on your US return. That will have you depreciation you need to recapture.
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nelsona non grata... and non pro

doncraig · Joined: 14 Aug 2007 Posts: 3

Thanks for the clarification. Yes I have been filing my US returns with this, though the prior returns erroneously used the adjusted cost base not the FMV so I've understated depreciation in 2008/2009. Fortunately at time of move to the US the exchange rate was at par and only a slight exchange diff at time of sale.

I am surprised that a capital loss is refunded I suppose I am used to Canada where capital losses go against capital gains only. Is this being calculated incorrectly?

nelsona · Joined: 27 Oct 2004 Posts: 5921 Location: Nowhere, man

In canada it is a write-off only against cap gains. Since you have none it is of no use to you.

In US, it will be deducted $3000/yr against any income, or fully against cap gains.

Its not refunded.
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nelsona non grata... and non pro