Capital gain tax on deemed disposition returning to Canada
Moderator: Mark T Serbinski CA CPA
Capital gain tax on deemed disposition returning to Canada
I am a Canadian non-resident working overseas, bought an investment property during this period. Now I am planning to return to Canada and will change the rental property to Principle residence. There is some price appreciation. I understand there will be a deemed disposition and re-acquisition of the property when I use it as a principal residence. So I will incur capital gain tax liability due to this deemed disposition. Do I need to pay the tax in the year of change of use? I understand there is election 45(3) which allows the tax payer to defer when actual sales occur. I wonder whether it is applicable to non-resident Canadian to elect to defer the tax payment? Thanks.
Re: Capital gain tax on deemed disposition returning to Canada
Since you will return to Canada and become a resident, 45(3) will be made when you are resident? You are not a non-resident anymore once you return and use it as principal residence. Btw, is it hard to get a mortgage on the property as a non-resident? I am a non-resident too, and am looking for an investment property in Canada also so wanted to know your mortgage application experience.
Re: Capital gain tax on deemed disposition returning to Canada
You are right Section 45(3) could be filed when actual selling the property. As to the mortgage, just save hard and have a big down payment, the Canadian bank will need 3 years notice of assessment from your local tax authority before approving the mortgage.
Re: Capital gain tax on deemed disposition returning to Canada
As long as you did not CCA the property while you were out of the country, you can elect to defer the cap gains on change of use. As was mentioned, your election will occur when you are a resident of Canada (a non-resident can't have a Principal residence in Canada)
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Re: Capital gain tax on deemed disposition returning to Canada
Thank you for your explanation. I claimed CCA, so I think I can't defer the capital gain tax.