Selling home in Canada after becoming Non resident

Nishant · Post by **Nishant** » Sun Sep 06, 2009 10:19 am

1) Got 3 year TN visa earlier.
2) Bought a house in US
3) Family moved to US
4) Leased home in Canada for long term through a realtor. Have to keep bank account to pay mortgage
5) Company switched me to H visa to initiate green card process.
6) Till green card is approved, I plan to keep the my house in Canada and continue leasing it.
7) I plan to file NR-73 this year to declare as non resident canadian and also file departure tax.
I also plan to file US 1040 with 1116 showing world income including Canada rental income on US tax return for 2009.

Questions-
1) Since my family spent less than 180 days in Canada, does my wife also has to file departure return & NR-73 separately in 2009 ?
2) For 2009, what taxes, I have to pay to Canada- Only on income in Canada or total income?
3) If I sell my Canada home after becoming non resident, do I have to inform 30 days in advance to get compliance letter from CRA? How will the capital appreciation taxed on rented house in Canada owned by a non resident?

Please advise.

nelsona · Post by **nelsona** » Sun Sep 06, 2009 12:55 pm

When did you and your family move to US?

Nishant · Post by **Nishant** » Sun Sep 06, 2009 7:05 pm

I moved in end 2008. My family moved from 27 Jun 09.

nelsona · Post by **nelsona** » Mon Sep 07, 2009 7:06 am

I assume you filed 2008 return as a Cdn resident reporting world income on it. And that you havebeen filing a 1040NR for the past 2-3 years reporting only your US income on that.

Do not file NR73. You don't need to. You beacme non-resident on june 27, no need to elaborate.

Your rental income has tax being withheld and sen to CRA now, yes?

So, to yout questions:

1. You all became non-res in June. You both file that way. No NR73. Follow the CRA Emigrants guide.

2. You neded to report all income earned anywhere including US before June 27 2009 on your departure return, Just as you have been doing for the past 2-3 years. The US income after june is not reportable.

3. Thje guide explains sales as non resident. What you need to establish right now is the value of the house when you made it a renatl, this will determine what portion is taxable when you do sell it. It is called a change of use.

Nishant · Post by **Nishant** » Mon Sep 07, 2009 2:30 pm

Hello Nelsona,
Thanks.

1) I had filed previous tax returns as Canadian resident and 1040NR for US
2)Question- If departure tax is upto 27th June world income, do I ignore salary paid on 30th Jun or do I take proportionate 27/30 ratio of salary?
3) Tax on rental income is not withheld so far. Where do I find details of process to start and pay previous rent tax arrears? I will go through emigrant guide to know details in it.
4) How do I valuate house prices as of 27th June 09 and keep that as a reference so that when I sell my house, it is useful.

Thanks

nelsona · Post by **nelsona** » Mon Sep 07, 2009 3:12 pm

2) I would simply include June income.
3) the guide explains and the realtor should be helping you
4) you need to get a proper evaluaution.

Nishant · Post by **Nishant** » Mon Sep 07, 2009 4:00 pm

Nelsona- Thanks
If you could elaborate on

1) Do we fill 1040 for 2009 since presence test require us to fill 1040 ? What income we show on 1040 as married filing jointly? Full year income or partial income beyond 27 June 09 on US return?

2) Do I need to do anything now since the return due date is in future?

3) Any advise on RRSP which is kept as it is with a financial institution in Canada.

nelsona · Post by **nelsona** » Mon Sep 07, 2009 5:31 pm

1) You should file joint 1040, reporting all world income for entire year, and then take Form 1116 foreign tax credits for the Cdn tax your wife paid on her income, and on any Cdn income you had (other than deemed dipsosition).

nelsona · Post by **nelsona** » Mon Sep 07, 2009 5:33 pm

2) Yes. You must get your rental tax payments made. Other than that, nothing to advise CRA until just priour to selling your house, or when you file your return in spring.

3) Move your RRSP to TD waterhouse. No other major bank etc will deal with you once you leave.

nelsona · Post by **nelsona** » Mon Sep 07, 2009 5:35 pm

3... and make sure any gains in your RRSP are crystalized (ie. move them around within funds if you have to) to make the book value has high as possible before leaving, this will reduce your eventual US tax on the future growth of your RRSP.

Nishant · Post by **Nishant** » Mon Sep 07, 2009 8:40 pm

Nelsona- Thanks for detailed information.

I had come across an article- link below- which mentions reduction or even eliminating withholding tax on rental income.
http://www.kvdb.com/TAXFAX/Emigration.pdf

Any comment or do you know any cases for such reductions?

nelsona · Post by **nelsona** » Tue Sep 08, 2009 3:50 am

Of course. This is explained in the CRA guides. But the is reduction must be applied for prior to the tax year. Your withholding would be based on net renatl income instaed of gross.

Even if you do not appy for this reduction, you still file a yearly 216 return and would get some or all of the withheld tax back.

nelsona · Post by **nelsona** » Tue Sep 08, 2009 6:19 am

http://www.cra-arc.gc.ca/E/pub/tg/t4144/README.html

Nishant · Post by **Nishant** » Tue Sep 08, 2009 4:30 pm

Nelsona- Thanks.

Another question as a possibility.

If after few years, if my kid decides to prefer a Canadian University for higher education - around 18 years of age then , does that affect my status as a non resident?

nelsona · Post by **nelsona** » Tue Sep 08, 2009 5:57 pm