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Hi Nelson, I am going in circles here. Please help! The rent / exclusion issue was my biggest, as I believe is a matter if interpreting the tax law. Once again, the reason we moved after 10 months was the actual change in place of employment of my husband. The reason of selling was that he continued...

Thanks for your prompt reply.

I have complied with all the CAd tax requirements, and that side of the story I have it all figured out.

I am only struggling with the US tax return.

You said that the capital gain for US purposes will be based on the VALUE in US$ on the day I left Canada. Can you quote me the IRS publication stating that? I did my research regarding that on the internet, couldn’t find much and I called IRS: they told me the cost should be at the exchange rate from the date the property was purchased. Were they wrong?

And, one more thing: what do you mean by “rent/exclusion issueâ€￾?

Thanks again.

Hi everybody,

I am reading this forum since I discovered it, for a couple of days now, and I find it very useful. I have been on IRS site for another couple of days reading the publications related to CG and I need some help.
I would appreciate an input and second opinions, if anybody is or has been in similar situations, regarding the following:

Facts: I and my husband are Canadian citizens, currently living in US on my husband’s H1B visa (I am on a H4 visa). We came to US in 2003 on a TN, respectively TD visa and switched in 2004 to H1B/H4.
When we moved to US, we rented our house in Canada, B.C. – after only living in it for 10 months. Reason for moving: my husband change place of employment.
This year we decided to sell our house in Canada as my husband continued to work with the same employer and they are in the process of filing an I140 petition for us. Another reason has been the fact that we decided that if the I140 doesn’t go through, when returning to Canada we would not go back to B.C., and rather go to Ontario, so the suitability of the property as a home materially changed.

Questions: The fact that the house has been rented and we do not meet the use test for the capital gain exclusion, means that we do not qualify not even for the reduced maximum exclusion?
On the other hand, calculating CG on the sale of the house for US tax purposes, using the rate of exchange prevailing as of date of the purchase and date of sale, respectively, gives me a “phantomâ€￾ capital gain. Is this taxable?

To sum all of this, am I to understand that even with all the right reasons for moving and selling the house that would qualify for a CG exemption, the fact that has been rented out makes me not eligible for any CG exemptions, and on top I have to pay taxes on a “phantomâ€￾ capital gain? It doesn’t make a lot of sense. Am I missing anything that might help minimize the tax liability on my US tax return?

Thanks in advance for any answers!