Change in use of house result in deemed disposition for non residents?

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

Moderator: Mark T Serbinski CA CPA

Post Reply
Sammi
Posts: 4
Joined: Tue Mar 31, 2015 12:36 am

Change in use of house result in deemed disposition for non residents?

Post by Sammi » Mon Jul 13, 2020 2:16 pm

Good morning,

Me and my husband left British Columbia in 2013 and filed a departure return listing our assets including our house. I believe I filed an election to defer any gains (but honestly I can't find my paperwork on this).

We started renting our house in 2019 and paying CRA 25% taxes on a monthly basis. 

We are now preparing our 2019 section 216 tax return and came across the change in use rules. As we have been non residents for all these years, it is unclear if this will be considered a deemed disposition. Is there an election that I can file for my situation with my tax return to ensure we are not assessed for capital gains? 

I am reading the special situation rules for change in use and it says we can make an election to not to be considered as having started to use your principal residence as a rental property." Is that something a non-resident can do?

Thank you kindly,

nelsona
Posts: 16589
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Change in use of house result in deemed disposition for non residents?

Post by nelsona » Mon Jul 13, 2020 5:20 pm

As a non-resident, you cannot use the change of rules exemption, so do not worry about it. You simply pay your NR tax monthly and file 216 every year. You will need to know the value of your hose when you left Canada and when you began renting it. You will be responsible for tax on gains from 2013 onwards, regardless if you had rented it or not, but will only need to pay when you sell.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Sammi
Posts: 4
Joined: Tue Mar 31, 2015 12:36 am

Re: Change in use of house result in deemed disposition for non residents?

Post by Sammi » Wed Oct 28, 2020 5:21 pm

Dear Nelsona thanks for your response.

I understand the part about I would be responsible for any gains from when I left to when I sell. May I ask, why would I need to know the fmv of the property when I started renting it? For what calculation?

I have a property manager that is affiliated with a real estate company, i suppose that I can ask them to get me something in writing. Is this what people normally do or do I need to investigate some sort of appraisal? I also have bc assessment paperwork for all years valuing my property.

thanks so much,

nelsona
Posts: 16589
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Change in use of house result in deemed disposition for non residents?

Post by nelsona » Thu Oct 29, 2020 12:55 pm

Aa a US taxapayer, you MUST depreciate yearly the properrty, and it is based on the value when you became a US tax resident.
An agent would be better placed to give you an FMV in writing.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

saad20
Posts: 22
Joined: Fri Oct 16, 2020 11:47 am

Re: Change in use of house result in deemed disposition for non residents?

Post by saad20 » Sun Nov 15, 2020 2:11 am

now preparing our 2019 section 216 tax return and came http://www.porterremovals.co.uk/ across the change in use rules. As we have been non residents for all these years, http://www.grandrapidsmover.net/ . http://www.discoverourtownblog.com/

ND
Posts: 158
Joined: Thu Feb 21, 2013 5:28 pm

Re: Change in use of house result in deemed disposition for non residents?

Post by ND » Tue Nov 24, 2020 9:59 am

"Aa a US taxapayer, you MUST depreciate yearly the properrty,". I don't believe that's accurate. When one sells a rental property, the cap gain must be calculated using allowable depreciation even if not taken but there's not a per se requirement to take depreciation (it's just a dumb tax move).

nelsona
Posts: 16589
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Change in use of house result in deemed disposition for non residents?

Post by nelsona » Tue Nov 24, 2020 11:41 am

ND, you are correct. The MUST was more in contrast to it being optional in Canada.
I should have said in US one *must account* for depreciation, whether declared or not.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Post Reply