Hello,
I am working in the US on a H1B visa , and in May 2005 I sold a rental property, and did not pay taxes on my capital gain because I had a large capital loss from previous investements. so I guess I am officially resident of the US June 2005.
Do I deduct the capital loss from the capital gain and pay taxes (25%) on the balance in Canada?
Do I have to report my net capital gain in the US, and pay taxes on it? If so, what form I need to complete?
Your help is greatly appreciated
MCH,
Capital Gain/Loss
Moderator: Mark T Serbinski CA CPA
I take it you are trying to file a ful-year 1040, and thus have to include all 2005 income on your 1040.
You may have to reconsider that decision, for the following reasons:
1. You do have to report the entire gain on 1040, because you are electing to be treated as US resident from Jan 1, 2005, and the sale occured after that date.
2. Unless the other capital losses you sustained were from 2005, you cannot use these to write down your gain on the renatl property on your 1040, as you can on your Cdn return.
3. The IRS will consider the Cdn tax you paid on your rental sale as the proportion of your overall tax, resulting from dividing your NET cap gains (including the losses) over your toatla income, so your Cdn tax eligible for the cap gains portion of 1116 will be very small.
4. Finally, since this sale was not subject to any deemed disposition rules, becaue it is Cdn real property, and because you sold before departing Canada, you cannot avail yourself of any deeed dispo provision in the treaty, or the Sept 18 2000 accord.
This is one casewhere simply filing a dual status return may be in your favour.
Even the Cdn provison of granting a Cdn tax credit for the US tax you paid, would not benefit you dure to the realatively small tax you are paying in Canada, due to using previous losses.
This is a case where your previous losses aren't really benefitting you...
You may have to reconsider that decision, for the following reasons:
1. You do have to report the entire gain on 1040, because you are electing to be treated as US resident from Jan 1, 2005, and the sale occured after that date.
2. Unless the other capital losses you sustained were from 2005, you cannot use these to write down your gain on the renatl property on your 1040, as you can on your Cdn return.
3. The IRS will consider the Cdn tax you paid on your rental sale as the proportion of your overall tax, resulting from dividing your NET cap gains (including the losses) over your toatla income, so your Cdn tax eligible for the cap gains portion of 1116 will be very small.
4. Finally, since this sale was not subject to any deemed disposition rules, becaue it is Cdn real property, and because you sold before departing Canada, you cannot avail yourself of any deeed dispo provision in the treaty, or the Sept 18 2000 accord.
This is one casewhere simply filing a dual status return may be in your favour.
Even the Cdn provison of granting a Cdn tax credit for the US tax you paid, would not benefit you dure to the realatively small tax you are paying in Canada, due to using previous losses.
This is a case where your previous losses aren't really benefitting you...
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
Ah, you said you were resident of US in JUne, why would you have US income from before May?
Sounds like you became a US tax resident BEFORE you sold your rental, so you are in bad spot; If you began working and living in US before you left canada, you have no choice but to include the rental income and the sale.
Sounds like you became a US tax resident BEFORE you sold your rental, so you are in bad spot; If you began working and living in US before you left canada, you have no choice but to include the rental income and the sale.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
