dual, now US resident w/ sale of Cdn investment property

[spock]

I've posted on this forum before and have found it very helpful. I would appreciate some advice. My situation is as follows:

Canadian resident and dual citizen until September 6, 2012. Moved to the US at that time. For 2012, while a resident of Canada, I had rental income, independent research income, investment income from the sale of an property, and employment income. In terms of expenses, I had tuition and education expenses, and expenses associated with moving, as well as the rental of one property, and the short-term rental and sale of the other.

Now I live in the U.S., and have employment income in addition to rental income from the Canadian property which I didn't sell, which I report under section 216. I am confirmed as a non-resident of Canada by the CRA.

My primary issue is with the sale of the investment property and to which country I should pay taxes on the gain from the sale. As I understand it, I should report all income on form 1040, and then use form 1116 and form 2555 to exclude Cdn sourced income and get a credit for any foreign taxes paid.

If I do this, and pay capital gains taxes on the sale of the Cdn property to the IRS, could the CRA challenge this and require me to pay taxes to them (i.e., putting me in a double tax situation)?

Any advice appreciated.

Thanks

[nelsona]

You MUST pay Cdn tax on Cdn property in any event. You get ref]lief from dounble tax on your 1040, not in Canada.

[nelsona]

... and you have quite a few hoops to go through to sell your Cdn property as anon-resident, so you best get up to speed on that before selling.
As you recall your rental was not deemed disposed when you left Canada, that is because Canada continues to tax such property (unlike other investments). Now will come the time to pay.

[spock]

Thanks. I sold the investment property while a resident. I continue to have a small ownership interest in a second rental property - income from which is taxed under s 216, and which I have no plans to sell while a non-resident.

I am declaring the property sale on my Canadian return and on my 1040, just don't want to have to pay tax to both the US and Canada on the sale.

[nelsona]

You must report the dale on both, since you are electing to file full year in US. You could of course file dual-status, and thus not have to report it.

[spock]

Thanks - what do you mean by file dual status?

[JGCA]

There have been many posts on this forum about dual status, just look it up and you will see.