Sale of Canadian House

[cfn2007]

Here is the scenario: A US citizen moves to Canada and buys a house to live in. He lives there for just over 1 year (but less than 2) and sells for a profit.

As I understand it, the sale generates no tax in Canada (sale of primary residence). However, it is a capital gain in the US (because lived in for less than 2 years). Can either of these 2 strategies be used to reduce US tax:

1) Offset the gain on Cdn house sale with losses from selling US stocks.

2) Lump the Cdn house gain together with Canadian-sourced interest & dividends and apply FTC's on a 1116.

Thanks!

[nelsona]

Good for you on generating a profit in this market.

Remeber to calculate the 'gain' using purchase in US dollarss and sale in US dollars (each valued on that day of buy/sale). This might reduce your profit in USD.

Off the top of my head I see no reason why either or both of these tactics would be disallowed.

[cfn2007]

That's good news. Thanks!

A couple follow-up questions:

1) Since the US treats the sale as an investment gain, can I net various costs that impacted the cost basis or sales proceeds? e.g. buy/sell lawyers fees, renovations, sales commissions, new appliance, carpet cleaning, etc.

2) My company reimbursed me part of my moving expenses. For Canadian taxes this is easy; I'll just net the reimbursement from my total move expenses (e.g. sales commissions) and deduct. For US taxes, since I cannot deduct the move expenses (except perhaps to offset investment gain per #1) can I just lump the reimbursement into my earned income and offset with FTCs?

Thanks.

[nelsona]

1. The expenses related to the sale reduce tghe proceeds. the other things you mentionned, like renovations, etc are not all deductible. There is a homeowners guide from IRS that outlinr all the costs that add to your cost basis.
2. Anything you recive from your employer is taxable in US. After that, You can only decut moving expenses that are eligible, if you meet the diustance test. It's all part of your foreign income.