Hello,
I am USC resident in Canada. My wife is Canadian. We co-own a primary residence in Canada that has appreciated. We have no rental income from the property.
Here is what I think I understand (please correct me if I have it wrong):
1. If we sell our house Canada, CRA will not tax us because it is a primary residence.
2. But, IRS will tax me on the appreciation of my half of the house.
3. I can gift up to about 100 thousand to my Canadian wife each year without filing a gift tax or other forms with either tax agency.
So here is what we am considering: Each year I gift a portion of my house ownership to my spouse, equal to about 100 thousand.
Does it make sense? Would it be as simple as a notarized gift letter?
I have no plans to leave my wife and I hope she doesn't either, but on the off-chance that she decides to divorce me at some point in the future, would this gift still be a part of our net family assets that get divided up under Ontario or Canadian divorce law?
Thanks a lot for any advice you can give.
Giift to NRA Spouse -- Still part of net family property?
Moderator: Mark T Serbinski CA CPA
1. correct.
2. Yes, but only if your half has increased more than $250,000, so even if held jointly the value would have to increase US$500K before any tax would be incurred.
3. Mostly correct. the amount you can give annually to your NRA spouse is actually ~$148K this year (it is indexed).
This tactic would be more to protect your estate from tax on the value of your half of the house (if your estate is more than US$5M) rather than cap gains should you sell before you die, but it accomplishes both.
So unless your CURRENT home has appreciated $500K, or if your estate is currently valued at more than $6M, I wouldn't be bothering about this tactic. If it is, you should probably be paying a US estate tax expert, not a forum.
2. Yes, but only if your half has increased more than $250,000, so even if held jointly the value would have to increase US$500K before any tax would be incurred.
3. Mostly correct. the amount you can give annually to your NRA spouse is actually ~$148K this year (it is indexed).
This tactic would be more to protect your estate from tax on the value of your half of the house (if your estate is more than US$5M) rather than cap gains should you sell before you die, but it accomplishes both.
So unless your CURRENT home has appreciated $500K, or if your estate is currently valued at more than $6M, I wouldn't be bothering about this tactic. If it is, you should probably be paying a US estate tax expert, not a forum.
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
Yes, just remember that is on EACH house you sell. If your house is approaching $500K in GAINS, I would more likely want to sell it and move in the same market. That restarts your $500K exemption.
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