selling house/moving/timing of tax residency

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TLchap
Posts: 9
Joined: Wed Mar 23, 2022 6:22 am

selling house/moving/timing of tax residency

Post by TLchap »

I plan to sell my residence in the US to move to Canada with my Canadian common-law partner. Up to now I have been solely a US citizen and resident. Because the house is in a revocable trust, and because I want to avoid the obligation of completing a trust tax return, I want to make sure the sale is completed and the proceeds cleared out of the trust before I become a Canadian resident for the purposes of taxation.

That said, we would like to begin the process of our physical move as soon as the house is empty. Ideally we will ship our possessions and drive north, renting temporary quarters in Canada while checking out our longer term housing options, all presumably starting before the house has sold - although within the same one- to two-month span of the same tax year. Are there barriers, cautions. or sequencing possibilities for this to be doable from a legal/taxation perspective?

If needed I imagine I could fly back to the US for close of escrow in order to re-enter Canada afterward; or we could fly up first, leaving the car for me to drive across the border later with the last of our possessions...
nelsona
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Re: selling house/moving/timing of tax residency

Post by nelsona »

Pretty much when you cross the border (therefore formally importing your belongings by filing papers with CBSA) and you have a place to live (other than a hotel) that is your residency starting date, unless you can overwhelmingly show that you has more residential ties in US (which would be hard to prove in your case).

However, since any property you would have in US, would take on a new cost basis the day you move, I would not worry about any cap gains tax in Canada.

I'll leave the trust issues for another.
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TLchap
Posts: 9
Joined: Wed Mar 23, 2022 6:22 am

Re: selling house/moving/timing of tax residency

Post by TLchap »

Thanks. I'm wondering if there is leeway to declare a later, second border crossing as the date my residency changes. Could any of the following support that?

1) My Canadian partner will sign with the CBSA for our shipping container, which will be stored at a facility near the border until she comes to claim it. I don't think I need to be involved in that, and we have some time flexibility on when that happens. And...

2) I can arrange to enter Canada with a car full of my key possessions after the house has sold.

3) The place we're staying in Canada is basically an AirBnB that we've reserved for a couple of months. The residence in the US is my address of record - and I may still intermittently be in the house - until it is sold.

I'm not worried about cap gains tax in Canada, but mainly want to avoid still having an asset (the house) in a trust when the CRA considers me to have become a resident.
nelsona
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Re: selling house/moving/timing of tax residency

Post by nelsona »

If you don't physically move to Canada you aren't resident of course.
I would check with an expert about what having this foreign trust (in Canada's eyes) means for you reporting-wise. It may mean nothing, if you don't want it to.

Can I ask the purpose of putting your home in a trust?
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
TLchap
Posts: 9
Joined: Wed Mar 23, 2022 6:22 am

Re: selling house/moving/timing of tax residency

Post by TLchap »

I guess part of the question is at what point CRA would necessarily consider me to have physically moved, since it may be a multi-part move (possibly flying in for a short visit, driving stuff across the border - not sure the order of those two trips yet, living in a short term rental that is not a hotel, then hopefully settling into a longer term lease...). My vital interests may be spread out in both countries during that transitional period, which I hope will be just a month or two.

To answer your question: The house was put in the trust in order to make life easier for my heirs by avoiding needless, costly US probate proceedings in the event of my death. While I am alive there is no real financial or tax consequence to having assets inside versus outside this kind of trust in the US. My understanding is that in Canada, by contrast, trusts are essentially treated as a person, or a separate entity; they require an extra tax return all their own, which adds complications and cost to one's filing, and possibly higher taxation as well. If e.g. for reasons of content or timing the trust could indeed "mean nothing" to the CRA or legitimately remain off the radar, that would relieve me of some concern about correctly scheduling different aspects of the move!
nelsona
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Re: selling house/moving/timing of tax residency

Post by nelsona »

once your spouse is living in Canada and your stuff is there, unless you are working and living in US, it would be hard to say your vital interests are in US.

Most people move their stuff last, after they have sold their home and found one in Canada. So their move date is accepted by CRA has their date of residency. You seem to be trying to do the reverse. Having an empty house and car in US is hardly a tie. No more than an empty house in Canada would keep your resident of Canada, if all else was in US.

I guess you could revoke the trust now, and be dome with that aspect.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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