Deemed disposition of Canadian property

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queenwest
Posts: 14
Joined: Tue Mar 02, 2010 11:13 am

Deemed disposition of Canadian property

Post by queenwest »

hi there,
We are planning to move from Canada to the US in a few weeks. We have a home which has been our principal residence and also a rental condo. I understand that Canadian real estate is exempt from deemed disposition. Does this apply to both the principal residence and rental condo?

We are not planning on selling either of the two Canadian properties at this time. The rental condo will continue to be leased and we are planning to rent our home after we leave. In terms of planning for a future sale of these properties, how do we go about getting FMV to determine cost base? Will a letter from a realtor suffice or will we need to get formal appraisals done? In the future, we will be selling these properties as US residents....how will the sale of these properties be taxed in the US?

thank you!
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Deemed disposition of Canadian property

Post by nelsona »

a solid evaluation form a realtor should be sufficient, with comparables, etc. to establish FMV.

When you sell your current principal residence, for US purposes the cost basis will be the FMV when you left.
When you sell the rental, you will be taxed on the entire gain, both in canada and US, with US giving credit for the Cdn tax. The FMV will be useful only in determining the required depreciation you will make in US every year,
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
queenwest
Posts: 14
Joined: Tue Mar 02, 2010 11:13 am

Re: Deemed disposition of Canadian property

Post by queenwest »

Thanks so much! Your response has been very helpful! Just one more follow up - regarding the deemed disposition when we leave Canada. The principal residence will be exempt but will we have to pay the capital gains tax on the deemed disposition of the rental condo? Or only when we sell it? We bought it in 2013 and it has appreciated quite a over the course of 8 years.
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Deemed disposition of Canadian property

Post by nelsona »

these properties are not subject to deemed disposition. So only when you actually sell these will you be subject to CDn (and US ) capital gains tax.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
queenwest
Posts: 14
Joined: Tue Mar 02, 2010 11:13 am

Re: Deemed disposition of Canadian property

Post by queenwest »

Thanks Nelsona! You rock! Where would I find this outlined - a CRA article? My husband seems to think that the exemption would not apply because it was always a rental property.
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Deemed disposition of Canadian property

Post by nelsona »

It is a Canadian property always subject to tax, so nit subject to deemed dispo.

The CRA form for deemed dispo mentions the exemptions.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Deemed disposition of Canadian property

Post by nelsona »

nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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