Moved to U.S., selling Toronto home

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ljohnson
Posts: 6
Joined: Wed Aug 10, 2016 11:39 am

Moved to U.S., selling Toronto home

Post by ljohnson » Thu May 11, 2017 9:57 am

Hi! I'm looking for some guidance with respect to T2061/T2091 filings. My wife and I bought our house in Toronto in 2002; we each have a 50% interest in the house. We have since separated; I moved out of the house in September 2016 to take a job in the U.S., where I now reside full-time. The house is being sold, with a closing date in July.

To summarize: ex-wife gets half of net proceeds and is still a Canadian resident; I get the other half, but I am a non-resident. The house was my principal residence until September 2016 (and is still my ex-wife's principal residence.) Now, some questions:

- For calculation of capital gains, is there some way to indicate my 50% interest in the home? Ideally, I don't want to pay tax on the whole gain if I'm only seeing half of the proceeds.

- With respect to the gains themselves, and escrow withholdings for the T2061, are the gains being calculated on the whole appreciation of the house since we bought it, or only since my move date? If the latter, would I need to obtain a retroactive appraisal of the house on my move date, and if so, who could I talk to about getting this done?

- Should I get getting the real estate lawyer to prepare the T2062 filing?

- Do the T2091/T2091-WS get sent in with the T2062, with my 2017 T1 return, or both?

- What else am I overlooking? What will I need to report to the IRS?

Thanks for any assistance.

nelsona
Posts: 16452
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona » Thu May 11, 2017 10:28 am

Obviously given the nature of your transaction, a real estate lawyer would best be involved.

But just to deal with how you will ultimately be taxed:
For, I'm assuming you have completed your 2016 departure tax return, making it clear that you departed in Sept 2106.

In Canada, since you left Canada less than one year ago, you will not owe any Cdn tax on the sale, because the formula for determining gains allows you to add 12 months to your actual time spent as principal residence.

In US, IRS allows you 3 years after moving to sell a former home -- which you did not subsequently rent out -- without owing cap gains tax.

So, you are in the clear fro ma tax point of view.

As to your non-residence compliance, if they are correctly filed early enough, you (actually the buyer) should be absolved of any requirement withholdings. In any event, those forms should only include your half of the sale. If there were withholding, it would be based on (a) the purchase price and (b) the entire gain, so there is no need to get an appraisal for these purposes.

If the sale was to be much farther down the road (>1 yr for Canada, >3 yr for US), you would need a Sept 2106 FMV appraisal to establish the tax basis at departure from Canada for Cdn and/or US purposes
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

nelsona
Posts: 16452
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona » Thu May 11, 2017 10:34 am

Just to clarify the US taxation. US would not tax you if sold in first 3 years after you left, only if you make less than US$250K on the house (your portion). I suspect that your house made more than $500K overall, so you may be on the hook for some US tax.

However, the treaty allows you to specifically exclude gains made before you left on the property, no matter how large, so if you are making more than $250K on the sale, it would be agood idea to get a sept 2016 appraisal. you would also want to go back and document anuy large capital expenses you made on the property to raise its ACB for US purposes., if that is needed to reduce the gain.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

ljohnson
Posts: 6
Joined: Wed Aug 10, 2016 11:39 am

Post by ljohnson » Thu May 11, 2017 10:43 am

That's better than I'd expected.

Yes, I indeed did file my 2016 return, indicating my departure date. That return has been assessed.

I have left a message with the lawyer to get the reporting/compliance paperwork rolling ASAP. Thanks for your reply!

ljohnson
Posts: 6
Joined: Wed Aug 10, 2016 11:39 am

Post by ljohnson » Thu May 11, 2017 10:46 am

We did spend several tens of thousands on renovations and repairs to ready the house for sale. Would those be applicable against the gain?

nelsona
Posts: 16452
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona » Thu May 11, 2017 12:08 pm

the IRS has rules on what is an eligible capital cost, I suggest you look those up (you only have to file next spring).

As I said, this only applies on your US tax return, and only if your house gained over US$500K since you owned it, or gained more than your half of the selling costs since you moved out. That would be the first steps I would look at.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

ljohnson
Posts: 6
Joined: Wed Aug 10, 2016 11:39 am

Post by ljohnson » Thu May 11, 2017 12:10 pm

Got it; thanks.

vyboco
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