Wonder if anyone could give me an idea of the tax implications of selling our farm
My husband started a job with a us corp and moved to texas, leaving me in Canada with our kids. We are looking at selling the farm which will entail huge capital gains. Our accountant says we will need to pay tax in US on complete value of capital gains if my husband has green card, and to sell before this happens, but my husband is convinced that there would be little or no capital gains taxes to pay. He thinks we would purchase a property in US for a higher value than what we sell in Canada and therefore would not pay tax. Who's correct?
moving/working in US and selling family farm
Moderator: Mark T Serbinski CA CPA
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shebalicious
- Posts: 2
- Joined: Mon Sep 15, 2014 1:50 pm
Neither are correct, although US will not see much if any tax from the sale.
Whether he needs to report this sale This issue comes down to tax residency, and the fact that he has left you back in Canada makes the issue of his tax residency quite mirky. he can claim that he still lives in canada while you are there, but not indefinitely.
The taxation of persons in the US is not soley if one has a Green card. if he lives in US, even under a temporary status like TN, or even tourist, then he could face US taxation on his world income. So he may already have to report the sale in US
Your husband is correct however that even if he were to wait until he left Canada (asuming he has not already left in April) to sell or even if now he had to report the sale becasue he is a US taxpayer, he would not owe much tax to US -- but not for the reason that he thinks. Canada would get its entire share of the tax, and the US would not likely see very much of this tax, since their taxrate is lower than canada, and US would give credit for the Cdn tax paid.
What he is mistakenly thinking of the in-kind exchange rules, but this only applies for 2 like properties in the same country, and would still not get rid of the Cdn tax. so you would want the tax in canada and US to occur simultaneously, to get the proper credit I mentioned above.
It would be alittle simpler from a Cdn taxation point of view to wrap this up before moving to US.
Whether he needs to report this sale This issue comes down to tax residency, and the fact that he has left you back in Canada makes the issue of his tax residency quite mirky. he can claim that he still lives in canada while you are there, but not indefinitely.
The taxation of persons in the US is not soley if one has a Green card. if he lives in US, even under a temporary status like TN, or even tourist, then he could face US taxation on his world income. So he may already have to report the sale in US
Your husband is correct however that even if he were to wait until he left Canada (asuming he has not already left in April) to sell or even if now he had to report the sale becasue he is a US taxpayer, he would not owe much tax to US -- but not for the reason that he thinks. Canada would get its entire share of the tax, and the US would not likely see very much of this tax, since their taxrate is lower than canada, and US would give credit for the Cdn tax paid.
What he is mistakenly thinking of the in-kind exchange rules, but this only applies for 2 like properties in the same country, and would still not get rid of the Cdn tax. so you would want the tax in canada and US to occur simultaneously, to get the proper credit I mentioned above.
It would be alittle simpler from a Cdn taxation point of view to wrap this up before moving to US.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
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shebalicious
- Posts: 2
- Joined: Mon Sep 15, 2014 1:50 pm
Ah, I see. You said it would entail huge capital gains, you did not say that some or all of these gains would be exempt form Cdn tax.
Well then, that is something that needs to be determined, and it may need to be determined quickly, since he is already opening himself up for US taxation on his portion of the property, by living and working in US.
If little or no tax is owed in Canada, then indeed one would want to get this done before IRS gets involved, as they would tax the sale. Again, the in-kind exchange would not be the solution.
If the sale does take place after either of you is considered a US taxpayer, there may be other tax relief measures, esp. if you owned the property before 1980, etc, which are too complex for this forum.
Well then, that is something that needs to be determined, and it may need to be determined quickly, since he is already opening himself up for US taxation on his portion of the property, by living and working in US.
If little or no tax is owed in Canada, then indeed one would want to get this done before IRS gets involved, as they would tax the sale. Again, the in-kind exchange would not be the solution.
If the sale does take place after either of you is considered a US taxpayer, there may be other tax relief measures, esp. if you owned the property before 1980, etc, which are too complex for this forum.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
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aaaaeroauto
- Posts: 1
- Joined: Wed Jan 21, 2015 1:12 pm
Re: moving/working in US and selling family farm
[quote="shebalicious"]Wonder if anyone could give me an idea of the tax implications of selling our farm
My husband started a job with a us corp and moved to texas, leaving me in Canada with our kids. We are looking at selling the farm which will entail huge capital gains. Our accountant says we will need to pay tax in US on complete value of capital gains if my husband has green card, and to sell before this happens, but my husband is convinced that there would be little or no capital gains taxes to pay. He thinks we would purchase a property in US for a higher value than what we sell in Canada and therefore would not pay tax. Who's correct?[/quote]
IF you want to move in texas then you can use http://www.aeroautotransport.com for Texas auto transport services for that.ti think it will be best for you.
My husband started a job with a us corp and moved to texas, leaving me in Canada with our kids. We are looking at selling the farm which will entail huge capital gains. Our accountant says we will need to pay tax in US on complete value of capital gains if my husband has green card, and to sell before this happens, but my husband is convinced that there would be little or no capital gains taxes to pay. He thinks we would purchase a property in US for a higher value than what we sell in Canada and therefore would not pay tax. Who's correct?[/quote]
IF you want to move in texas then you can use http://www.aeroautotransport.com for Texas auto transport services for that.ti think it will be best for you.
YOu need to see a tax accountant to determin the huge capital gain on the farm. If indeed it is sheltered by the capital gains exemption say $ 750K or more based on the new budget the qualifying gain is only tax free in Canada the US will not recognize this so as was stated before sell it before you move. Another thing why you need to consulkt with a tax guy is the huge gain may be sheltered from tax but I can guarantee you you will have minimum tax to pay on the sheltered gain and once you leave Canada its is lost it can not be carried forward as normal. So yes you will have complicated tax see a tax accountant ASAP to talk about min tax problem too.
JG