Non resident selling rental property Section 216 return for rent + T1 for cap gains

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CadCad
Posts: 18
Joined: Mon Jan 28, 2019 12:18 am

Non resident selling rental property Section 216 return for rent + T1 for cap gains

Post by CadCad »

Hello,

A non resident of Canada who sold a Canadian rental property based is supposed to file 2 returns:

1-section 216 to report rental income + expenses (including taxes already paid per NR4) for that last year of operations
2-a non resident return (T1 General) to report capital gains and CCA recapture. CRA guide for section 216 states you might need to file another return but I found a stronger confirmation from Nelsona over here: viewtopic.php?t=6756

What I can't figure out is how to avoid reporting the rent and expenses twice? In other words, since both returns will include form "776 Statement of Real Estate Rentals", how to avoid reporting (and getting taxed) twice for the same rental income?

I'm thinking to only report rental income and expenses on section 216 return (no CCA recapture, no disposition to avoid triggering capital gain) and then report those in the T1 return, the problem is that I would be leaving out factual information in both 776 forms which doesn't feel right.

I have been trying to find how to proceed in this awesome forum and on CRA guides but no luck so far.

Has any one done it or know what is the proper way to move forward?

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

Re: Non resident selling rental property Section 216 return for rent + T1 for cap gains

Post by nelsona »

You simply do not report the renatal income on the other return. The same would happen if you file 216 and also workd in Canada for a bit. You would only report the wages on the NR return.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
CadCad
Posts: 18
Joined: Mon Jan 28, 2019 12:18 am

Re: Non resident selling rental property Section 216 return for rent + T1 for cap gains

Post by CadCad »

Thank you nelsona.

Quick follow up lease. In 216 return, form 776:

1-List the rental as it didn't get sold, just fill the form like I still own the property. I.e. leave "Area E – Building dispositions in the year" empty? Or

2-Declare the disposition in Area E and column A of CCA table but leave this entry empty "Recaptured capital cost allowance line 9947" to avoid triggering CCA recapture?

When filing, since both returns go to different process centers, what do you think would be safer:

a-include a note explaining the gaps?
b-include the other return in addition to the note?
c-make no reference to the other return to avoid confusing them since each department is only dealing with its own piece of he pie?

Sorry if being pedantic, just trying to be safe, avoid confusing CRA and dreading having to do amend returns with if I don't get it right the first time...

Thanks again!
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Non resident selling rental property Section 216 return for rent + T1 for cap gains

Post by nelsona »

I think you can figure this out. Send both returns at same time. CRA knows that rental income doesn't go on an NR return.
You will need to recapture on your NR return. Report only rental items on your 216.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
SM
Posts: 94
Joined: Fri Mar 20, 2015 3:43 pm

Re: Non resident selling rental property Section 216 return for rent + T1 for cap gains

Post by SM »

I assume form T2062 and T2062A were completed on sale and certificate of compliance issued?

Only the capital gain and tax withheld on T2062 goes on the T1 non-resident return. Form 776 is left completely blank on the non-resident return.

You are over thinking this. Think about it this way. You are paying 25% Part XIII non-resident withholding tax during the year. You normally have NO obligation to file a S.216 return. It’s an elective return. Of course you would normally want to do so to claim your expenses and get some or all of the 25% back. But this is why no rental income and expenses are reported on the T1 non-resident return. You are ELECTING to report them on the S.216 return, not a T1 non-resident return.

The only time a S.216 return is mandatory, is in the year of sale IF you have recapture. So even if you had no rental income in the year of sale, if you had recapture, you would still have to file a S.216 return to report it. Recapture always goes on the S.216 return along with the tax withheld on the T2062A.

It's exactly as you described in your example 2 above, EXCEPT you include the recapture on line 9947.

Take my word for it, I've done at least a dozen of these over the years. And just so you know, if you report the recapture on the non-resident return by mistake, CRA will correct you and place it on a separate S.216 return.

What do you mean the returns go to different processing centers? They normally always go together to the same centre. Don't forget to include the certificates when you mail them.

Hope this helps.
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