My wife and I, dual US-Canada citizens, moved permanently to Canada on June 30, 2010. At that time our house in Buffalo NY was still on the market unsold. On that date our second house in Canada became our new principal residence (previous to that date the house in Canada was a seasonal residence). The house in Buffalo was our principal residence from when we bought it (July 1981) until we moved June 30, 2010.
The house in Buffalo finally sold about eight months later, with closing on Mar 9, 2011. In the US, the capital gain (about $100,000) is not taxable, as it was our principal residence and we sold it within three years after we changed residence.
What is the situation from the Canada viewpoint? The instructions say to call the CRA because we had foreign residence. I did so, the CRA lady at the international tax office was very confused, went for help and then lost my call. I have two thoughts:
(1) Does the one year tax-free opportunity to sell a principal residence in Canada apply when the residence, and the residence period, were in the US?
(2) If not, is there treaty relief to avoid paying tax to Canada on eight months of the capital gain? What section?
Thanks.
Sale of former US residence 8 months after move to Canada
Moderator: Mark T Serbinski CA CPA
Don't bother with CRA, they can't help you on the phone
First off, like ALL your property, canada considers that you acquired it on the day you moved to canada.
So, at worst, your house cost basis is the FMV when you moved. You should be able to have that evaluated.
1. No. But the only gains you would be taxed on is the gain of the last eight months, which should be minimal.
2. No, that IS the taxable gain. proceeds from sale minus FMV when you moved. This should be minimal considering you have selling costs.
For others (since you don't need this), you could consider your house in US as proncipal residence until you sold it (there is nothing preventing this). Of course this would make it entirely tax-free, but would make more of your former cottage-now-home, eventaully taxable (as you can only designate one home as principal.
But, as I said, you don't need to do this, sicne you don't have any cap gains to pay on your US home, due to selling costs.
First off, like ALL your property, canada considers that you acquired it on the day you moved to canada.
So, at worst, your house cost basis is the FMV when you moved. You should be able to have that evaluated.
1. No. But the only gains you would be taxed on is the gain of the last eight months, which should be minimal.
2. No, that IS the taxable gain. proceeds from sale minus FMV when you moved. This should be minimal considering you have selling costs.
For others (since you don't need this), you could consider your house in US as proncipal residence until you sold it (there is nothing preventing this). Of course this would make it entirely tax-free, but would make more of your former cottage-now-home, eventaully taxable (as you can only designate one home as principal.
But, as I said, you don't need to do this, sicne you don't have any cap gains to pay on your US home, due to selling costs.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best