Canadian inherits U.S. assets where Estate Tax has been paid

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cbstewar
Posts: 9
Joined: Sun Nov 13, 2016 9:59 am

Canadian inherits U.S. assets where Estate Tax has been paid

Post by cbstewar »

I am hoping you can assist me. Recently a couple of my Canadian relatives inherited assets from their parent where U.S. Federal & State estate taxes had been paid.

I read that under the U.S.-Canada tax treaty, when the Canadian who inherits the property dies, the U.S. estate tax will be a credit against their Canadian capital gains tax.

My interpretation with simple numbers:
Portfolio on death........... $5,000
Investment Basis.................500
Estate Tax paid...................100
Canadian Taxable Gain......$4,400

Is this correct? Thank you!

Brent in OH
Brent in Ohio
nelsona
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Re: Canadian inherits U.S. assets where Estate Tax has been paid

Post by nelsona »

It is a credit on the DECEASED's Cdn taxes, not the inheritor, since they have no tax to pay. Why would you be showing a taxable Cap gain in canada on that inheritance?

The credit would only work for, say a US citizen living (and dying) in canada. Then the estate tax could be used as a credit against any taxes that the deceased would incur at death.

I've never heard of estate tax being used later by the one who inherits.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
cbstewar
Posts: 9
Joined: Sun Nov 13, 2016 9:59 am

Re: Canadian inherits U.S. assets where Estate Tax has been paid

Post by cbstewar »

My source was a U.S. estate lawyer (who I thought was very knowledgeable about the US-Canada tax treaty!). I asked the question to attempt to verify his statement as it was something I was not aware of (and did not understand how it might work).

Nelson, thanks for your input.
Brent in Ohio
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
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Re: Canadian inherits U.S. assets where Estate Tax has been paid

Post by nelsona »

I could see this in the context of a US person, or perhaps for US tax on US real estate. But for a Cdn person and Cdn taxation, their inheritance comes free and clear, and you start from zero, with the value it had when you inherit it. So their is no banck taxes owed later, so no need for any credit for the estate taxes paid.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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