My husband worked in Montreal but he started a new job in US since June,2005 under TN. My concern is about my house in Montreal which we plan to sell it this year(2006).
Do we have to pay the taxes when we sell the house?
This house has been our primary residence at the time we left the country.
Right now, my parents are taking care of the property.
Any idea? Thanks
Nam
About selling a property
Moderator: Mark T Serbinski CA CPA
You will not owe Cdn tax if you sell it withing 12 months of leaving.
You will owe no US tax if you sell it withing 3 years of moving to US.
But the sale must be reported (in both countries) and then exemption is taken.
You will owe no US tax if you sell it withing 3 years of moving to US.
But the sale must be reported (in both countries) and then exemption is taken.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
[quote]
You will owe no US tax if you sell it withing 3 years of moving to US.
[/quote]
I bought my house in Ontario in May 2003, became a US resident in ARP 2005, wife moved to US in Nov 2005. We filed 1040 joint return for 2005. The house was sold in Sep 2006. Our net tax liability to CRA is nil and certificate has been issued by CRA so we are good with CRA.
So I owe no tax to IRS because we sold it within 3 years of moving to US? How do I report my sale and more importantly how do I exempt it? Does the $250K(times 2 if married) exemption, or part of it apply to us?
What I'm really confusing is the date of purchase, should that be May 2003 or Jan 2005?
Thanks a bunch!
You will owe no US tax if you sell it withing 3 years of moving to US.
[/quote]
I bought my house in Ontario in May 2003, became a US resident in ARP 2005, wife moved to US in Nov 2005. We filed 1040 joint return for 2005. The house was sold in Sep 2006. Our net tax liability to CRA is nil and certificate has been issued by CRA so we are good with CRA.
So I owe no tax to IRS because we sold it within 3 years of moving to US? How do I report my sale and more importantly how do I exempt it? Does the $250K(times 2 if married) exemption, or part of it apply to us?
What I'm really confusing is the date of purchase, should that be May 2003 or Jan 2005?
Thanks a bunch!
Since you satisfy the 3 year rule, as long as you did not rent out your Cdn house before selling it, your gain is not taxable, and IRS takes the position thatif such gain is not taxable, it need not be reported either. if you rented it out then you owe tax at least on the depreciation you took (or should have taken) while in uS. This is regardless of what overall gain you made.
The only other concern you have is the $500K limit on gain. If you don't exceed this, then, see above. no taxable gain, no report.
If your gain is over $500K (congrats), then you can use the treaty provision, which states that for the purpose of determining tax on a Cdn's home when moving to the states, the cost basis shall be no less than the value when yopu left. This ought to lower the gain below the $500K,and thus make it not taxable. In this case I would report the sale (with alll the correct numbers, and then adjust it by refering to the treaty, and file a Form 8833 to explain the treaty position you are taking. (Article XIII.6).
The only other concern you have is the $500K limit on gain. If you don't exceed this, then, see above. no taxable gain, no report.
If your gain is over $500K (congrats), then you can use the treaty provision, which states that for the purpose of determining tax on a Cdn's home when moving to the states, the cost basis shall be no less than the value when yopu left. This ought to lower the gain below the $500K,and thus make it not taxable. In this case I would report the sale (with alll the correct numbers, and then adjust it by refering to the treaty, and file a Form 8833 to explain the treaty position you are taking. (Article XIII.6).
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
My folks have owned a property in Canada since 1951. They lived there for about 18 mos, when they moved to the States, and have rented it since then, submitting the yearly loss/gain and paying the taxes.
Mom's now considering selling the property. She's a Canadian citizen living here in the US. If, for the sake of conversation, she sells it for $100,000 and they originally built it in 1951 for i.e. $10,000, will she need to pay CA capital gain on $90,000? In that scenario, what is the cap gains %?
Adding to that of course the loss on the CA/US exchange if she wants to bring that money to the States....
Is there some preliminary planning we should do before she sells it?
Any guidance you can give would be greatly appreciated.
Thanks.
Jack
Mom's now considering selling the property. She's a Canadian citizen living here in the US. If, for the sake of conversation, she sells it for $100,000 and they originally built it in 1951 for i.e. $10,000, will she need to pay CA capital gain on $90,000? In that scenario, what is the cap gains %?
Adding to that of course the loss on the CA/US exchange if she wants to bring that money to the States....
Is there some preliminary planning we should do before she sells it?
Any guidance you can give would be greatly appreciated.
Thanks.
Jack
Canada:
She will be taxable on the gain. The big question will be how much of the gain is taxable. Recall that for many years there was a cap gains exemption, and there have been various cap gains taxrates over the years. She would need to talk to a Cdn acct who would be familiar with these historical considerations.
As well, as a non-resident, he has certain filing certificates that she needs to obtain BEFORE selling, to avoid unnecessary tax withholding. This is explined on the non-resident section of the CRA website.
US:
Again, she would be taxable on the gain. However the US has also had various rules over the years on cap gains, and there is the matter of recapture of depreciation, which is always done on rental property on 1040. An acct familiar with these would be advisable.
The determination of tax is determined for both countries separately. In canadayou would use straight C$.
For US, you would use the US$ exchange rate in effect at the time cost was incurred (ie. 1951 rate for purchase, 1984 rate if renovations were made in 1984, etc). If you sell this year, the dispositin in C$ would be recalculated at todays rate. Once the Cdn tax is determined (on a non-resident return next spring), she could use that tax as a credit on her 1040 (using form 1116) against any US cap gains tax she owes.
so, her biggest issue is determining what portion of the proceeds would be exempt of tax and at what inclusion rate yjese had over the years. and then making sure she files the non-resident documatation at time of sale (her Cdn broker should be familair with these, and it should be made claer before sale that your mother is non-resident)
She will be taxable on the gain. The big question will be how much of the gain is taxable. Recall that for many years there was a cap gains exemption, and there have been various cap gains taxrates over the years. She would need to talk to a Cdn acct who would be familiar with these historical considerations.
As well, as a non-resident, he has certain filing certificates that she needs to obtain BEFORE selling, to avoid unnecessary tax withholding. This is explined on the non-resident section of the CRA website.
US:
Again, she would be taxable on the gain. However the US has also had various rules over the years on cap gains, and there is the matter of recapture of depreciation, which is always done on rental property on 1040. An acct familiar with these would be advisable.
The determination of tax is determined for both countries separately. In canadayou would use straight C$.
For US, you would use the US$ exchange rate in effect at the time cost was incurred (ie. 1951 rate for purchase, 1984 rate if renovations were made in 1984, etc). If you sell this year, the dispositin in C$ would be recalculated at todays rate. Once the Cdn tax is determined (on a non-resident return next spring), she could use that tax as a credit on her 1040 (using form 1116) against any US cap gains tax she owes.
so, her biggest issue is determining what portion of the proceeds would be exempt of tax and at what inclusion rate yjese had over the years. and then making sure she files the non-resident documatation at time of sale (her Cdn broker should be familair with these, and it should be made claer before sale that your mother is non-resident)
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing