I'm a dual Cdn/US and my wife is Canadian only (NRA for US tax purposes).
We're selling our home in Canada and moving to another Canadian home and I'm well over the $250K capital gain (it's taken almost 20 years) but under the $500K capital gain for joint US filers.
Is there anyway I can claim the capital gains extension up to $500K for married couples?
My NRA wife has never filed a US tax return - and has no tax reason as she has no US income and no US presence.
Sale of Canadian Home and US Capital Gains
Moderator: Mark T Serbinski CA CPA
You can get the $500K exemption only by filing a joint tax return with your spouse. You can do this on a year-by-year basis if you wish. This would be one of these years.
This is a known gotcha for US citizens living in canada.
You can also look at some of the expenses you have incurred over the years (plus those incurred for the sale) that might raise the cost basis of your home. Homeowners don't usually track these since their gains are tax-free in canada, but there are some expenses that could be used to reduce your gain (if you are just over the 250K mark).
Otherwise, its joint 1040, with all the unfortunate paperwork for your spouse.
This is a known gotcha for US citizens living in canada.
You can also look at some of the expenses you have incurred over the years (plus those incurred for the sale) that might raise the cost basis of your home. Homeowners don't usually track these since their gains are tax-free in canada, but there are some expenses that could be used to reduce your gain (if you are just over the 250K mark).
Otherwise, its joint 1040, with all the unfortunate paperwork for your spouse.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
Sorry. My mistake. I was thinking about the case where the profits were more than $500K, not between $250-$500.
As voribo pointed out, if the house was truly jointly owned, and prvious tax filings indicated as such, then the final gains are split, too. In such case, the US taxaper can claim the exclusion which should cover the entire gain.
However, if the US taxpayer has been claiming all the mortgage interest, and all the property tax (ie acting like he was sole proprietor), then he cannot now claim that he is joint owener.
As voribo pointed out, if the house was truly jointly owned, and prvious tax filings indicated as such, then the final gains are split, too. In such case, the US taxaper can claim the exclusion which should cover the entire gain.
However, if the US taxpayer has been claiming all the mortgage interest, and all the property tax (ie acting like he was sole proprietor), then he cannot now claim that he is joint owener.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
In this case I'm estimating the capital gain from the home sale to come in just under $500K USD - but well over $250K.
I've never claimed any mortgage or other housing deductions on my US returns. I've always just filed as HOH and as my income has always been under the FEIE limits everything zeroed out.
If I need to file some sort of joint return is this a "one time event" for the tax year the home is sold - or am I creating some sort of on-going obligation to file joint returns as MFJ or MFS? Will my NRA spouse need to file an FBAR?
I've never claimed any mortgage or other housing deductions on my US returns. I've always just filed as HOH and as my income has always been under the FEIE limits everything zeroed out.
If I need to file some sort of joint return is this a "one time event" for the tax year the home is sold - or am I creating some sort of on-going obligation to file joint returns as MFJ or MFS? Will my NRA spouse need to file an FBAR?
Review what I just posted, your gains are under $250K, so you are fine.
But, if for any reason she had to join you in filing, it would only be year-by-year, as I said.
She would have to submit to all the reporting requiremnts for that year, however. While FBAR (now FinCEN) is apparently not required under this case, all oher IRS requirements (PFICs, trusts, etc) would. FBAR/FinCEN is not an IRS requirement, it is a Treasury Dept program.
But, if for any reason she had to join you in filing, it would only be year-by-year, as I said.
She would have to submit to all the reporting requiremnts for that year, however. While FBAR (now FinCEN) is apparently not required under this case, all oher IRS requirements (PFICs, trusts, etc) would. FBAR/FinCEN is not an IRS requirement, it is a Treasury Dept program.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
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Here are some thoughts no one has mentioned:
1)If you meet certain qualifying use standards, you may qualify for a tax-free exchange of one piece of property you own for a similar piece of property
But due to a usage test, this may be moot for a personal residence as the real estate investment property can't be for personal use. But perhaps worth at least investigating.
2) Support for counting only 50% may be: Some jurisdictions have a matrimonial property regime that essentially embraces characteristics of separate and community property - a hybrid regimes. Examples are Germany, Québec and Ontario.
In Ontario, spouses live under a hybrid separate property regime. During the marriage, property acquired by one spouse remains his or her separate property. Upon the death of a spouse, the Family Law Act, R.S.O. 1990, c. F.3 (“FLAâ€) provides that the surviving spouse is entitled to make a claim for an equalization payment with respect to the deceased’s estate (subs. 5(2) of the FLA).
3) What can trap cross-border taxpayers beyond the amount of the exclusion is the US definition of principal residence, which is different from Canada’s concept of “ordinarily inhabitedâ€.
In Gates v. Commissioner, 135 TC No 1 (2010), the court held that the taxpayers were not entitled to the exclusion despite having owned the home since 1984, because they had demolished their house and rebuilt on the same property. The new house did not satisfy the two year principal residence requirement.
1)If you meet certain qualifying use standards, you may qualify for a tax-free exchange of one piece of property you own for a similar piece of property
But due to a usage test, this may be moot for a personal residence as the real estate investment property can't be for personal use. But perhaps worth at least investigating.
2) Support for counting only 50% may be: Some jurisdictions have a matrimonial property regime that essentially embraces characteristics of separate and community property - a hybrid regimes. Examples are Germany, Québec and Ontario.
In Ontario, spouses live under a hybrid separate property regime. During the marriage, property acquired by one spouse remains his or her separate property. Upon the death of a spouse, the Family Law Act, R.S.O. 1990, c. F.3 (“FLAâ€) provides that the surviving spouse is entitled to make a claim for an equalization payment with respect to the deceased’s estate (subs. 5(2) of the FLA).
3) What can trap cross-border taxpayers beyond the amount of the exclusion is the US definition of principal residence, which is different from Canada’s concept of “ordinarily inhabitedâ€.
In Gates v. Commissioner, 135 TC No 1 (2010), the court held that the taxpayers were not entitled to the exclusion despite having owned the home since 1984, because they had demolished their house and rebuilt on the same property. The new house did not satisfy the two year principal residence requirement.