Non Resident Canadian working in USA looking to sell House

[mrmystery44]

Hello,

I have been living and working in the US since Dec 99, and am considered non resident in Canada. I still own a House in Calgary, Alberta which has been rented out since I moved. I bought and lived in the house as my primary residence in Dec of 97.

Every year, I file a NR6, NR4 and Elect under Section 216 to file an income tax return for the year with the Canadian Government, which mostly is done by an accountant in Calgary. With the IRS, I file as a sole proprietor as a "Service : Consulting" business and only get 1099-MISC forms. This year will be the first year I file as a married person. My wife is a US citizen who is a teacher.

I am researching what I need to do inorder to sell the Canadian property, and am trying to figure out how to determine what my tax bill to the Canadian Gov and US Gov will be.

Although the value of my house in Calgary has almost tripled over the last seven years, I fear by the time I pay taxes and the balance of the mortgage, it might not be worth selling!

Although I will probably get an accountant to do this (I am looking for a new one), can you advise on what guides I should read, and what forms would be required?

Thanks

[nelsona]

Good to here that you have been filing your Cdn taxes correctly.

I trust you have also been reporting all this rental information on your US return (along with the required depreciation that you MUST take in US).

When you sell property asa non-resident of canada, you will need to meet certain compliance issues BEFORE sale.

See: http://www.cra-arc.gc.ca/tax/nonresiden ... enu-e.html

This may or may not require that you have some of the proceeds from the sale withheld pending final tax calculation.

In determining the capital gains tax that you will be required to pay in canada, it will come down to 2 methods: either (a) paying only on all the gains after you left, or (b)paying a percentage of the entire gain, based on how many years you owned it and how many years you lived in it.

For US purposes, you only choice is (a), plus adding back the depreciation.

For example: You owned the home 15 years and it appreciated $100K, $20K in the 6 years you lived there, and $80K in the 9 years since.

Your capital gains subject to tax in canada would be either $80K by method (a), or 7/15th of $100K by method (b) (Note: you get to add a year to your 6 years of residence in this calculaton) or roughly $45K. You do your own calculation and choose.

For US, your taxable gain would be the $80K (the US canada treaty allows former Cdn residents to use the value when they left as the cost basis, rather than the entirte ammount), plus all the depreciation that you've claimed in the past. There is no withholding requirement for IRS purposes on this transaction.

You would then claim any final Cdn tax paid as a credit on your 1040