Sale of US property by Canadian
Moderator: Mark T Serbinski CA CPA
Sale of US property by Canadian
If a Canadian citizen/resident has reported the disposition of a piece of US property on his Canadian tax return as business income (apparently implied that he was in the business of selling property), can this sale of property be reported on a business statement in the US. My concern is that the foreign tax credit may get mixed up if the income is reported as active income in Canada, and passive income in the US, if it has to be reported as a capital gain in the US.
If you have reported it as business income to Canada it must mean that the asset held in the US was not held as a Capital Asset but rather as Inventory so you have no choice but to record it as such in the US.
If the asset sold was also a depreciable asset then you may have recptured dep and form 4797 will need to be filled out as well. Remember if it was depreciable in the US you were taking notional dep each year and now you need to calculate this also, for Canada this does not apply, if the asset was non depreciable then this does not apply.
By matching up the revenue stream in Canada and US you then can apply the foriegn tax credit.
If the asset sold was also a depreciable asset then you may have recptured dep and form 4797 will need to be filled out as well. Remember if it was depreciable in the US you were taking notional dep each year and now you need to calculate this also, for Canada this does not apply, if the asset was non depreciable then this does not apply.
By matching up the revenue stream in Canada and US you then can apply the foriegn tax credit.
JG