I work for a CDN firm who transferred me to one of its US offices for the next 2 years. I am in the US on an L1.
I left on March 2.
My spouse is staying in Canada as I will be returning in 2 years (I visit every month).
In February we sold our primary resident home (sold as in we have a firm contract) as my spouse wanted to rent a smaller place while I'm away. The house is in my name and my spouse's name.
The sale of the house closes in [u]early June[/u]. My spouse is still living there and will be there until the house closes.
My question is on taxes: by the end of the year 2013 I assume I will be deemed a resident of the US for tax purposes (I am being paid in US$ and paying US taxes). When my house closes will be I have to pay any capital gains? We sold it before I left and it was my primary residence. I will be returning the Canada in 2 years.
I just want to know whether I have to file some complicated paperwork with the goverment for the house sale to go through as at the time of the sale I'm still deemed a CDN resident, but at the end of the year I will be considered a US resident (based on working in the US and the # of days I'm in the country).
Any help is appreciated.
Primary residence sold but spouse still in Canada
Moderator: Mark T Serbinski CA CPA
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david_1980_
- Posts: 3
- Joined: Wed Apr 24, 2013 10:43 am
You will only be a deemed-non resident of Canada IF you curtail your visits to Canada to visit spouse. Deemed non-residncy requires that you meet the TREATY definition of US resident, not merely the IRS definition. By visiting regularly, you are in fact saying that your center of vital interst is in canada. If your spouse were instead to visit you, this would make your centre in US, and you would be deemed non-resident.
Since you also have plans to return to Canada, it would be a stretch to say that you would be considered non-residentr, deemed or otherwise.
As to the taxation of you former principle residence (assuming you are deemed non-resident -- which if you were would take effect on the day you moved to US, not at some future date) you have a year after departure before you would owe tax on your portion, so no worries there.
In US, you will need to declare the sale, but the value when you left would be the cost basis, and assuming you lived in it 2 years before moving, and sell within 3 years of your move, you won't be taxable.
So, your house sale is nota big deal in terms of cross-border taxation. You need to decide if your other income/goals would make it better for you to become deemed non-resident, or simply stay resident of Canad (this would not affect how you file your US taxes -- you probably would file as a US resident). This wouldepend on whether you wanted to colapse your RRSP, had lots of CDn investments that you did not want to wind-up, etc.
Based on this, you would then decide whether she visits you, or you visit her.
My guess, since you seem worried about the sale, would be to continue visiting Canada and remaining resident. AS i said, thsi wioll not adversely affect your US taxation, the worse it cabn do is make you pay a little more Cdn tax.
Since you also have plans to return to Canada, it would be a stretch to say that you would be considered non-residentr, deemed or otherwise.
As to the taxation of you former principle residence (assuming you are deemed non-resident -- which if you were would take effect on the day you moved to US, not at some future date) you have a year after departure before you would owe tax on your portion, so no worries there.
In US, you will need to declare the sale, but the value when you left would be the cost basis, and assuming you lived in it 2 years before moving, and sell within 3 years of your move, you won't be taxable.
So, your house sale is nota big deal in terms of cross-border taxation. You need to decide if your other income/goals would make it better for you to become deemed non-resident, or simply stay resident of Canad (this would not affect how you file your US taxes -- you probably would file as a US resident). This wouldepend on whether you wanted to colapse your RRSP, had lots of CDn investments that you did not want to wind-up, etc.
Based on this, you would then decide whether she visits you, or you visit her.
My guess, since you seem worried about the sale, would be to continue visiting Canada and remaining resident. AS i said, thsi wioll not adversely affect your US taxation, the worse it cabn do is make you pay a little more Cdn tax.
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
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david_1980_
- Posts: 3
- Joined: Wed Apr 24, 2013 10:43 am
Thank you, Nelsona.
My spouse visits me here once a month and I go back there once a month.
My main concern was not paying capital gains on the sale of the house, but it sounds like that won't be case since I'm selling in the same year that I'm moving temporarily.
From what I've recently been told (but again, I hear conflicting info) is that a Resident or Non-Resident of Canada won't be held liable for taxes on a primary residence that is sold so long as it is done within one year of leaving the country. Is that true/have you heard that?
Many thanks.
My spouse visits me here once a month and I go back there once a month.
My main concern was not paying capital gains on the sale of the house, but it sounds like that won't be case since I'm selling in the same year that I'm moving temporarily.
From what I've recently been told (but again, I hear conflicting info) is that a Resident or Non-Resident of Canada won't be held liable for taxes on a primary residence that is sold so long as it is done within one year of leaving the country. Is that true/have you heard that?
Many thanks.
Didn't I just say that?
"you have a year after departure before you would owe tax on your portion"
The only difference is that you would have extra forms to fill out BEFORE sale, as a non-resident.
Given your situation, it is very unlikley that Canada would deem you non-resident, so use this to your advantage, by reamining Cdn tax resident, and avoiding much of the extra parework in canada becaue of the move, and in US from becoming a US tax resident (particularly if you work in a state that has income tax).
"you have a year after departure before you would owe tax on your portion"
The only difference is that you would have extra forms to fill out BEFORE sale, as a non-resident.
Given your situation, it is very unlikley that Canada would deem you non-resident, so use this to your advantage, by reamining Cdn tax resident, and avoiding much of the extra parework in canada becaue of the move, and in US from becoming a US tax resident (particularly if you work in a state that has income tax).
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
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david_1980_
- Posts: 3
- Joined: Wed Apr 24, 2013 10:43 am