Capital gain in Canada and loss in the USA

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ClassicSax
Posts: 12
Joined: Sun Apr 10, 2022 5:05 pm

Capital gain in Canada and loss in the USA

Post by ClassicSax »

Situation: Dual US/Canada citizen residing in the USA.
Sold a cottage in Canada with significant capital gain in 2022.
Can I offset some of this Canadian capital gain by having a USA capital loss in the same year (2022)?
As I pay income tax and capital gain only in USA, I am assuming that it should work. Am I correct?
Sincerely
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Capital gain in Canada and loss in the USA

Post by nelsona »

Don't know what you men by "offset".

Your only Cdn capital gain/loss is your Cdn cottage. That is all you can report in Canada. So you won't be able to reduce that.

In US you report the sale of the cottage, using the correct historical exchange rates to determine the cap gain/loss for US purposes, along with any other gains/losses for the year, and any losses carried forward, all reported on schedule D. So, of course, any losses you incur this year, or carried forward from past years will reduce the total gain for the year.

You can use the tax you paid in Canada as a credit on your US return against the US tax on the cottage on your US return, using form 1116, and carryforward any unused portion of that Cdn tax for future foreign passive income. As you say, other than that cottage, it is unlikley that you will have other passive income in Canada that will use up the CDn tax.

So it might NOT be in your best interest to incur any unnecessary capital losses this year in US, as this would reduce your ability to use up the Cdn tax you paid. You would want rather to be able to claim as much Cdn tax as possible by making sure you have a hefty cap gain for this year, and wait until next year to trigger any other losses.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
ClassicSax
Posts: 12
Joined: Sun Apr 10, 2022 5:05 pm

Re: Capital gain in Canada and loss in the USA

Post by ClassicSax »

Thanks for the clarification.
Sincerely,
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