Tax planning - transfer of property at death to NR USC

[DonMurphyCanada]

Looking a little more carefully at our assets and have noticed we have a sizeable capital gain on our primary residence in Canada. The home is in my name only (I am a Canadian Citizen my wife a USC - not like our RESP mess , we did something right.)

My question is if I leave the house to my wife if I die prematurely is this subject to Capital Gains in the US? For example say a $500000 capital gain?

I was thinking that it might be better to leave it to the children in that case (the non USC children we have that is!

Thanks,

Don

[nelsona]

There would be no US tax on the gains triggered by your death regardless of whom you gave it to. The question then becomes whether, for US tax purposes, your spouse would inherit the house with the current cost basis or would it become the inherited amount. I'll see what I can find out.

It most certainly would be the new cost basis for the kids. The problem may be that in some provinces you simply cannot bequeath the marital home to anyone but your spouse.

[DonMurphyCanada]

The examples here indicate a "step up in basis" occurs so no capital gains would be owed. http://hodgen.com/category/nonresident- ... nresident/ Wow that's a big loophole in my eyes.

The article goes on to say a Grantor Trust can be created to also save on the US estate Tax but that's not required here ( presumably because it's under the threshold?)

[nelsona]

That atricle is definitely on point.

the idea is that cap gains amased over a US persons lifetime will be subject to estate tax, rather than cap gains tax. This has long been the case. But as rthe article points out, even gains NOT subject to estate tax, benefit from this rule.

I agree that no truxt need be set up, yo uare way below the threshold for that.

I would leaveit to yoru wife, since, as I said earlier, you may have no choice on this under Provincila law, and there is no tax penalty for doing so.