2014 Canadian tax return as NR with disposition of property

czilin · Post by **czilin** » Wed Mar 25, 2015 12:54 am

Hi there,

My wife and I are preparing for our 2014 tax return (both Canada and US) for the first time, and we could not figure out what to report since the situation seems complicated.

Here is our situation:

1. Myself: started to work in US as TN in Oct 2013. (An accountant firm helped me file my 2013 tax.)

2. My wife: quitted her job in Canada on Jan 30, 2014 and flied to the US on the same day. She has not worked since then.

3. We put our townhouse in Canada on sale after my wife left, and the transaction closed on Mar 31, 2014 (that is 5 months after I left Canada, and 2 months after my wife left Canada). The townhouse was originally purchased in 2009 for $310000 and was sold in 2014 for $380000. [BTW, I don't know how the others managed, but how could a family with kids sell their home before they leave Canada?]

4. We filed request for Certificate of Compliance afterwards and got the mail (it states THE DISPOSITION OF PROPERTY BY A NON-RESIDENT OF CANADA) from CRA in May 2014. The T2068 form we received states this:
- proceeds of disposition: $160000
- exemption type: principle residence exemption
- exemption: $56000
- adjusted cost base: $164000
- ownership percentage: 50
- of gross proceeds: $380000

5. We purchased our home in the US in July 2014.

We have not read the T2068 form in details until now, and it scared us to death: Does it mean my wife and I each needs to report $16000/2 = $80000 income from our home sale? We have several questions to clarify:

1) We heard selling our primary home due to emigration does not need to pay tax on the proceeds. Is this right? Does the timing of our sale play any role with respect to this guideline?

2) Even if we need to pay tax on the proceeds, why is it $16000? We purchased the townhouse in 2009 for $310000 and sold it in 2014 for $380000; so the difference should be $70000 at most (it should have other deductions). How did CRA come up with the $160000 number in form T2068?

Finally, how should my wife and I file our US and Canada tax - as R or NR, Canada first or US first, eFile or paper (since we need to attach T2068)? Which forms should we use - especially for the Canada tax report? We used to use TurboTax in Canada, is it still good for our situation this year?

Your help is really appreciated!

czilin · Post by **czilin** » Sat Mar 28, 2015 12:16 am

Please: anyone having any advice?

nelsona · Post by **nelsona** » Sat Mar 28, 2015 12:55 am

Your post is too confusing, missing zeroes here and there. We normally write $300,000 or $300K to avoid this.

Proceeds means selling price minus costs (broker, etc). You should each have one of these forms. The forms would be based on the information you gave them.

You get one year to sell your house after leaving without owing cap gains tax, so you are fine, you will owe no tax.

czilin · Post by **czilin** » Tue Mar 31, 2015 12:03 am

Thanks very much for the comments and sorry for the unreadable numbers.

Now the question is how do I and my wife file our Canadian tax. I had 0 Canadian income in 2014 and have the T2068 forms to send. My wife worked for 1 month and had about $6,000 Canadian income in 2014 and has the T2068 forms to send. Do we report tax regularly as we did in previous years? Or we shall file as NR? Which forms to use? Does TurboTax or another software support this type of filing, or we have to print out certain forms and fill out manually?

If we need to mail, can I put my wife's tax report and mine in the same mail (maybe in 2 separate envolopes inside)? Or we have to mail separately?

Sorry for asking so many questions. Many thanks!

nelsona · Post by **nelsona** » Tue Mar 31, 2015 12:32 pm

Since YOU submitted an departure return in 2013, you file a non-resisnt return, reporting the sale of the house, and claiming the principle residwnce exemption, ie. no income. Although probably from a technical point of view you do not have to report, you should to get this all on the books.

Since your spouse is only filing her departure return for 2014, she files a normal return for her province, including her wages and the dsale of the house, nd also claims the principle resisnce exemption, and fulfills all the other requirements of an EMIGRANT, just like you did in 2013.

czilin · Post by **czilin** » Tue Apr 07, 2015 1:37 am

Many thanks Nelson!

I am finally ready to put our tax reporting in action. I logged in to TurboTax.ca (just like previous years); but as I went through those interview questions, I began to suspect maybe that's not the software I should use in my case? It asked me questions like "did you pay for day care for your dependents", "did you receive CCTB", etc. All these do not seem to be applicable to us, right?

I don't mind paying for the $17 TurboTax online standard version, but is it good for me to use? I was a NR and had $0 Canadian income (I have not received any tax slips like T4/T4A); would TurboTax handle it correctly? Should I use some simple paper tax form instead; and if so, which forms please?

For the US tax part, I suppose I can use TurboTax US version to file together with my wife. Should we report the Canadian house sale (T2068) to IRS; and if so, how?

And should we coordinate our Canada filing with our US filing? I mean, which one should be first, or it does not matter for us?

Thanks a lot!

nelsona · Post by **nelsona** » Tue Apr 07, 2015 7:58 am

I always recommend ufile in canada and taxact in US.

But your situation is so simple that ii'm quite sure ttax can handle it. Ufile would be free.

In US when you sell a property that qualifies as your home, and you owe no tax, you don't report it.