Transfer ownership on residence to spouse while downsizing

icbusiness · Post by **icbusiness** » Tue Oct 12, 2010 4:06 pm

I am US/Cda Dual citizen - My wife is Canadian - We file Jointly - We will not be returning to USA - Our dependent son is a USA Citizen (19)

We jointly own a house in Canada with about $350K equity and are going to downsize in 2011 to a condo for an expected price of $325K. (House is worth 530K, Mortgage $180 (ref ACB the original down payment was $70)

We would like explore putting the new condo solely in my wife name understanding there could be USA estate tax planning benefits for my (Non USA Citizen) wife if I die before her.

What happens at that time of putting the house in her name.....I know we have to report the sale on our returns but are there any special USA or Cdn tax forms applicable going from Joint to Sole ownership OR is there Tax exposure at that time (2011)

Thank you

nelsona · Post by **nelsona** » Tue Oct 12, 2010 4:15 pm

Nothing special about the purchase.

However, be aware that many US citizens living in canada are being hit when they sell their prinipal residence because, while Canada treats the sale as tax-free, US only treats the sale as tax-free if it is less than $250K profit ($500K if filing jointly).

This is determined using historical exchange rates, so a $405K Cdn gain could become more than that in US dollars, if the ACB is actaully lower in USD based on the date of purchase.

You appear to be on the good side of $500K, but be careful, and be sure that in the year of sale you truly do file a joint 1040.

icbusiness · Post by **icbusiness** » Tue Oct 12, 2010 5:04 pm

That's interesting - When up-sizing ...house after house (in the good old days) is is really an outright sale (potentially creating the tax exposure you mentioned at $250k Profit/500k joint Profit)) if a new, presumably larger house is being purchased?
Previously I had understood that the tax exposure in the USA occurred when you did not re-invest the full amount of equity in another house (within 2 yrs?)

nelsona · Post by **nelsona** » Wed Oct 13, 2010 9:34 am

You are thinking about investment property. The rules on personal homes have changed (for the better) and are as outlined above. There is no requirement or advantage in purchasing anything with the proceeds.