I am a US citizen and my wife is not and we live in Canada. I own qualifying farm property which if sold will have significant capital gains which will for the most part be offset by the Cdn Lifetime Capital Gains Exemption.
Is there anyway I can legally avoid US capital gains if I sell this property ?
Thanks
disposition of qualifying farm property
Moderator: Mark T Serbinski CA CPA
As you are already aware the special lifetime exemption on farm property in Canada up to $750K cap gain is not receognized in the US.
For US purposes ita considered a Sec 1231 capital gain subject to long term rates depending on your AGI this will determin your rate. If you had deducted certasin expenses such as consevation costs then part of it could also under Sec 1252 be considered as ordinary in the US also. Most likely since the farm in in Canada you are taxed on the gain as a long term cap gain. You will used you cost basis to calculate the gain in the US no tax credit is given for Canadian tax unless its over and above your exemption.
For US purposes ita considered a Sec 1231 capital gain subject to long term rates depending on your AGI this will determin your rate. If you had deducted certasin expenses such as consevation costs then part of it could also under Sec 1252 be considered as ordinary in the US also. Most likely since the farm in in Canada you are taxed on the gain as a long term cap gain. You will used you cost basis to calculate the gain in the US no tax credit is given for Canadian tax unless its over and above your exemption.
JG