Hello,
I had capital losses between 2000 & 2004 in the amount exceeding $50,000 (real estate investment and stock market). Now (in 2005),I sold a rental property, and finally realized a small capital gain. I am currently resident in the US, but in the eyes of Revenue Canada, probably not since my spouse live in Canada.
The lawyer is telling me that he has to deduct the tax on the capital gain up front! My understanding is that I can offset this capital gain against previous capital losses. Is he right?
Thank you for your help.
Capital Gain
Moderator: Mark T Serbinski CA CPA
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote"><i>Originally posted by MCH</i>
Hello,
I had capital losses between 2000 & 2004 in the amount exceeding $50,000 (real estate investment and stock market). Now (in 2005),I sold a rental property, and finally realized a small capital gain. I am currently resident in the US, but in the eyes of Revenue Canada, probably not since my spouse live in Canada.
The lawyer is telling me that he has to deduct the tax on the capital gain up front! My understanding is that I can offset this capital gain against previous capital losses. Is he right?
Thank you for your help.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
He's correct if you've said that you are a non-resident of Canada. The standard is to withhold 25% of the proceeds unless a compliance certificate is applied for and granted which can reduce the withholding to 25% of the projected net capital gain.
Then, as a non-resident, you are required to file a 2005 non-res T1 and declare the gain. On that return, you'd be able to offset your actual gain with the losses and get a refund of the withholding.
It's therefore imperative that you establish what your current residency is. If you're still a resident of Canada, then there need be no withholding, but you have to sign a declaration to that effect which the goes to the purchaser (because it's actually the purchaser's responsibility to withhold and remit tax on a purchase from a non-resident).
Carson
Hello,
I had capital losses between 2000 & 2004 in the amount exceeding $50,000 (real estate investment and stock market). Now (in 2005),I sold a rental property, and finally realized a small capital gain. I am currently resident in the US, but in the eyes of Revenue Canada, probably not since my spouse live in Canada.
The lawyer is telling me that he has to deduct the tax on the capital gain up front! My understanding is that I can offset this capital gain against previous capital losses. Is he right?
Thank you for your help.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
He's correct if you've said that you are a non-resident of Canada. The standard is to withhold 25% of the proceeds unless a compliance certificate is applied for and granted which can reduce the withholding to 25% of the projected net capital gain.
Then, as a non-resident, you are required to file a 2005 non-res T1 and declare the gain. On that return, you'd be able to offset your actual gain with the losses and get a refund of the withholding.
It's therefore imperative that you establish what your current residency is. If you're still a resident of Canada, then there need be no withholding, but you have to sign a declaration to that effect which the goes to the purchaser (because it's actually the purchaser's responsibility to withhold and remit tax on a purchase from a non-resident).
Carson
Real estate capital gains/losses will be reported in the country/state/provincewhere the property is located PLUS in the country of residence, if it is different.
Other capital gains will be reported ONLY in the country of residence, regardless of where the broker is.
For the purposes of applying this rule (which is a treaty rule) you can only be resident in ONE Country, by the terms of Article IV.
<i>nelsona non grata... and non pro</i>
Other capital gains will be reported ONLY in the country of residence, regardless of where the broker is.
For the purposes of applying this rule (which is a treaty rule) you can only be resident in ONE Country, by the terms of Article IV.
<i>nelsona non grata... and non pro</i>
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote"><i>Originally posted by nelsona</i>
Real estate capital gains/losses will be reported in the country/state/provincewhere the property is located PLUS in the country of residence, if it is different.
Other capital gains will be reported ONLY in the country of residence, regardless of where the broker is.
For the purposes of applying this rule (which is a treaty rule) you can only be resident in ONE Country, by the terms of Article IV.
<i>nelsona non grata... and non pro</i>
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Hey Nelson, you just can't help yourself, can you? Being the "Good Tax Samaritan" is just too appealing for you. [:)]
If only I was as good at my hobbies as you are at this!
Regards,
Carson
Real estate capital gains/losses will be reported in the country/state/provincewhere the property is located PLUS in the country of residence, if it is different.
Other capital gains will be reported ONLY in the country of residence, regardless of where the broker is.
For the purposes of applying this rule (which is a treaty rule) you can only be resident in ONE Country, by the terms of Article IV.
<i>nelsona non grata... and non pro</i>
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Hey Nelson, you just can't help yourself, can you? Being the "Good Tax Samaritan" is just too appealing for you. [:)]
If only I was as good at my hobbies as you are at this!
Regards,
Carson
Yeah
I don't mind talking of issues, or helping when someone is <i>planning </i> to do something.
It's just when someone moved to US last March 2004, and is just today realizing that they need to do their taxes, and suddenly they aren't as simple as when they were a student[8][:0], that I'm reticent to help.
Particulary since, is has been my experience, people get pretty testy [}:)] around April 2nd or so.[B)]
<i>nelsona non grata... and non pro</i>
I don't mind talking of issues, or helping when someone is <i>planning </i> to do something.
It's just when someone moved to US last March 2004, and is just today realizing that they need to do their taxes, and suddenly they aren't as simple as when they were a student[8][:0], that I'm reticent to help.
Particulary since, is has been my experience, people get pretty testy [}:)] around April 2nd or so.[B)]
<i>nelsona non grata... and non pro</i>
I live and work in the US since May2003, but maintain a home in Canada, and my spouse lives in it, and I support her.
Here is what I think.
I am resident of Canada because of strong ties, so I have to pay taxes in Canada and in the US, but since I can only be resident in one country (as per the treaty), then what am I for the IRS?
Best
Here is what I think.
I am resident of Canada because of strong ties, so I have to pay taxes in Canada and in the US, but since I can only be resident in one country (as per the treaty), then what am I for the IRS?
Best
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote"><i>Originally posted by MCH</i>
I live and work in the US since May2003, but maintain a home in Canada, and my spouse lives in it, and I support her.
Here is what I think.
I am resident of Canada because of strong ties, so I have to pay taxes in Canada and in the US, but since I can only be resident in one country (as per the treaty), then what am I for the IRS?
Best
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Well, if under the Art IV tie-breaker rules you're a Canadian resident, then you'll have to file:
T1 - full year, world income, credit for US taxes (Fed & State, Social Security and Medicare paid).
1040NR with Treaty position showing why you're considered a Canadian tax resident for the year, you'll be taxed on your W-2 income only.
State return(s) - resident or non-resident depending on state rules, taxed on world income or US salary only, depending again on the state rules.
Don't forget Nelson's comments about how real estate capital gains are taxed.
Carson
I live and work in the US since May2003, but maintain a home in Canada, and my spouse lives in it, and I support her.
Here is what I think.
I am resident of Canada because of strong ties, so I have to pay taxes in Canada and in the US, but since I can only be resident in one country (as per the treaty), then what am I for the IRS?
Best
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Well, if under the Art IV tie-breaker rules you're a Canadian resident, then you'll have to file:
T1 - full year, world income, credit for US taxes (Fed & State, Social Security and Medicare paid).
1040NR with Treaty position showing why you're considered a Canadian tax resident for the year, you'll be taxed on your W-2 income only.
State return(s) - resident or non-resident depending on state rules, taxed on world income or US salary only, depending again on the state rules.
Don't forget Nelson's comments about how real estate capital gains are taxed.
Carson
I think MCH has anoyther issue which he is dealing with and that is the WITHHOLDING of tax from the proceeds because he is considerd non-resident.
I wouldn't suggest trying to exempt yourself from this by claiming to be a US resident, but I would look into some of the other ways to be excluded from this withholding.
Otherwise, I wouldn't fret over the withholding, as you will get it back when you file the 1040NR.
As to how you should file in general, if you feel that the 1040NR tax rate is too high (ie. close or over your Cdn tax rate), you can always file a XXV non-discrim tax return, which effectively makes you subject to US tax on your wages and real estate only, but at the same RATE that a US citizen pays filing MFJ (without having to include any other foreign income.
This is by the Article XXV.4 which is a <b>powerful</b> method for married cdns working in the US to lower their US tax rate.
It is designed specifically for married Cdn residents earning wages in US.
As I said, this need only be looked at if your effective Cdn tax rate is lower than the tax rate calculated normally using 1040NR -- which it very well might be.
<i>nelsona non grata... and non pro</i>
I wouldn't suggest trying to exempt yourself from this by claiming to be a US resident, but I would look into some of the other ways to be excluded from this withholding.
Otherwise, I wouldn't fret over the withholding, as you will get it back when you file the 1040NR.
As to how you should file in general, if you feel that the 1040NR tax rate is too high (ie. close or over your Cdn tax rate), you can always file a XXV non-discrim tax return, which effectively makes you subject to US tax on your wages and real estate only, but at the same RATE that a US citizen pays filing MFJ (without having to include any other foreign income.
This is by the Article XXV.4 which is a <b>powerful</b> method for married cdns working in the US to lower their US tax rate.
It is designed specifically for married Cdn residents earning wages in US.
As I said, this need only be looked at if your effective Cdn tax rate is lower than the tax rate calculated normally using 1040NR -- which it very well might be.
<i>nelsona non grata... and non pro</i>