Canadian non-resident selling property in Quebec

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drakira
Posts: 1
Joined: Mon Sep 05, 2016 11:57 am

Canadian non-resident selling property in Quebec

Post by drakira »

Hello,

I am selling for 460K my Quebec property acquired in June 2006 for 325K. The deed of sale will be signed mid-September 2016.

The property was my principal residence between June 2006 and July 2014. In July 2014 I moved to the States on a TN visa.

I will be claiming the principal residence exception (T2091) when I fill in the T2062 form to request the Certificate of Compliance related to the disposition of taxable Canadian property. I haven't submitted the forms yet and I will not have the certificate at the time of the actual disposition.

The notary wants therefore to withhold non-resident taxes of 25% and 12.875% from the "proceeds of disposition" (i.e. from the gross selling price) instead of the actual taxable capital gain. That is, about 175K.

Based on T2091 form (Designation of a property as a principal residence), the actual taxable capital gain (not including expenses such as real estate commissions, notary fees, etc.) is 13.5K. That is, the difference between the capital gain BEFORE principal residence exception totaling 460-325=135K (Line 17 of T2091 form) and (460-325)*(8+1)/10 = 121.5K (Line 22), considering that I owned the property for 10 years and I designated the property as principal residence for 8 years.

The difference between what the notary wants to withhold and the actual taxable capital gain is significant (175K vs. about 38% of the actual capital gain of 13.5K) and, since I don't have enough equity to cover the proposed tax withholding of 175K, the notary asks me to provide about 100K in his trust in order to be able to withhold the sales tax, pay off my mortgage and the real estate agent commission.

I would appreciate if someone can cast some light on what are my options, taking into account that I will not able to come up with the funds requested by the notary?

Thank you.
JGCA
Posts: 754
Joined: Thu Nov 18, 2010 3:05 pm
Location: Montreal, QC Canada

Post by JGCA »

ITs simple file the exemption certificate with CRA and MRQ RIGHT NOW!!!! the notary will then release the funds and charge you only the tax that the govt agrees to you still must file a tyax return at year end biut at least the withholding is reduced. Why would you not yet file the form , you know it take 3 months to get a clearance certificate back from both CRA and MRQ so file it now and whn the certificate comes the notary will release the funds to you then.
JG
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