Afternoon,
I’m looking for some information/advice on Canadian taxes with regards to the sale of my home in Toronto. I spent two-half years there working for a company on a work visa with citizenship from the US. In May of 2008 I took a job working back in the states and placed my home on the market. In June I came to the states and began work, living in temporary housing at a hotel. I continued to maintain the house as a residence in Canada until its sale in September.
My wife and kids spent part of the summer living at the in-laws in the states, which is a normal occurrence for them. My concern is with the sale of my house and whether is qualified as my primary residence during the time. Neither my closing lawyer nor the purchasers lawyers withheld tax or a filed a section 116 for the sale. They seemed to think it was still a primary residence I suppose. Were they correct or should I be looking at having to account for it this tax year? I know I will be filing both a US and CDN filing already because of the partial year I worked there. As well as I need to file for the Disability credit for my one child.
Any thoughts on what I need to be filing and looking for this year would be greatly appreciated.
Thanks
Primary Residency home Sale?
Moderator: Mark T Serbinski CA CPA
For Cdn purposes you should be non-resident from June.
As long as you sold the house within one year of leaving canada, you owe no Cdn tax on it, sdo there is no point claiming that your spouse stayed in the house past June, nor that you maintained it available for you until September. It simply doesn't matter. You left in June, and should not have to pay any Cdn tax on your US income from that point on.
For US taxes, since you lived in it for 2 years, it was considered a main home and is thus free of US tax as well (assuming you made less than US$500K profit on it).
Use ufile.ca for your taxes, it works for 'departing resident' which is what you are.
As to the disability credit, look at the eligibility requirement. It may be that the child would have to be in canada the whole year, but, in any event, the treaty provisions would likley override this, and your child would be eligible.
As long as you sold the house within one year of leaving canada, you owe no Cdn tax on it, sdo there is no point claiming that your spouse stayed in the house past June, nor that you maintained it available for you until September. It simply doesn't matter. You left in June, and should not have to pay any Cdn tax on your US income from that point on.
For US taxes, since you lived in it for 2 years, it was considered a main home and is thus free of US tax as well (assuming you made less than US$500K profit on it).
Use ufile.ca for your taxes, it works for 'departing resident' which is what you are.
As to the disability credit, look at the eligibility requirement. It may be that the child would have to be in canada the whole year, but, in any event, the treaty provisions would likley override this, and your child would be eligible.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
For US, you will report all income for the entire year on your 1040 and then use either form 1116 to get credit for Cdn taxes paid and/or use Form 2555 t oexclude your Cdn wages from US taxation.
You usually try both and then see which yields lower US tax.
You usually try both and then see which yields lower US tax.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
iguess to be a non-resident you need to act like one, which will be the argument you can use in stating that you were still resident of canada when you sold (which is probably the case).
Did you not advise the lawyer that you were non-resident?
If so, why did they not seek compliance? This would have made things far simpler for you. The issue was not tax: the house was still entitled to prinipal residencxed exemption, as I outlined above. The 116 compliance becomes the key issue.
If worried about this, then simply make your departure date after the sale. You will have to report the US income your earned until that date. it will cost youa little more in Cdn tax.
The basis for saying that you left in June is by considering yourself a 'deemed non-resident' from that time, due to (a) your continuous presencer in US and (b) your US citizenship. But becuase yo did have this house available to you, you could simply say that you did not leave canada until you sold.
Did you not advise the lawyer that you were non-resident?
If so, why did they not seek compliance? This would have made things far simpler for you. The issue was not tax: the house was still entitled to prinipal residencxed exemption, as I outlined above. The 116 compliance becomes the key issue.
If worried about this, then simply make your departure date after the sale. You will have to report the US income your earned until that date. it will cost youa little more in Cdn tax.
The basis for saying that you left in June is by considering yourself a 'deemed non-resident' from that time, due to (a) your continuous presencer in US and (b) your US citizenship. But becuase yo did have this house available to you, you could simply say that you did not leave canada until you sold.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
I wish I knew why they didn't file it. I never really thought I would lose my resident status till I completed the transaction. Honestly I'm thinking I should just file them with the June date and see what the CRA comes back with or if they just leave it alone. I thought about giving the CRA a call just to see what they say I should do as well. The confusion of their residency laws leave alot for interpretation.
Really, it is your situation that makes for confusion.
Having a home in canada makes you a tax resident of canada.
However, working and being a present in US continuously since June, and having your family in US makes you US resident by treaty (thus the term I used: deemed non-resident).
The rules for 116 are also clear that deemed non-residents are treated exactly like non-residents, ie. they need to comply.
My guess is that you thought you needed to be resident to avoid tax on sale of home, and so 'forgot' to tell them you were non-resident. Had you known that there was no tax obligation, you would have been more forthright about your status, and the lawyers would have seen to it that 1116 was complied with. You can't expect the lawyer to read your mind.
Anyways, forget about 116 at this point. That boat has sailed.
File as an emigrant from June. If they come back and hassle you over 116, just change the date to september.
Don't submit an NR73 or ask CRA to determine your status. That is a losing gambit. Just file your emigrant return, following the "Emigrant" tax guide to the letter.
Having a home in canada makes you a tax resident of canada.
However, working and being a present in US continuously since June, and having your family in US makes you US resident by treaty (thus the term I used: deemed non-resident).
The rules for 116 are also clear that deemed non-residents are treated exactly like non-residents, ie. they need to comply.
My guess is that you thought you needed to be resident to avoid tax on sale of home, and so 'forgot' to tell them you were non-resident. Had you known that there was no tax obligation, you would have been more forthright about your status, and the lawyers would have seen to it that 1116 was complied with. You can't expect the lawyer to read your mind.
Anyways, forget about 116 at this point. That boat has sailed.
File as an emigrant from June. If they come back and hassle you over 116, just change the date to september.
Don't submit an NR73 or ask CRA to determine your status. That is a losing gambit. Just file your emigrant return, following the "Emigrant" tax guide to the letter.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Thanks. I'll work it out with ufile probably.
I honestly wasn't trying to avoid any tax on the house. I lost 15k on the sale unfortunately. Both lawyers were aware of my location since they actually couriered the documents to me and my wife at my office in the states to be signed.
They will let you change the departure date after filing?
I can hope that I have enough refund from the CRA to clear the penalty if they tag it on me.
I honestly wasn't trying to avoid any tax on the house. I lost 15k on the sale unfortunately. Both lawyers were aware of my location since they actually couriered the documents to me and my wife at my office in the states to be signed.
They will let you change the departure date after filing?
I can hope that I have enough refund from the CRA to clear the penalty if they tag it on me.
They will let you, if you include the US income.
Don't think of your refund as cancelling out the penalty! Your refund is money CRA shouldn't have had in the first place.
Don't think of your refund as cancelling out the penalty! Your refund is money CRA shouldn't have had in the first place.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
[quote="nelsona"]
Don't think of your refund as cancelling out the penalty! Your refund is money CRA shouldn't have had in the first place.[/quote]
lol True, but if it keeps me from actually writing them a check out of money I already have it's more like a blessing in my opinion. I just sent them my last payment for taxes due last year, so anything is better then that.
Probably means I need to try and file both US and CDN myself and hold off the US until I know if I'm going to have to change things to match the CRA. If I move the date I assume that will mean a drastic change to my 1040 as well.
Don't think of your refund as cancelling out the penalty! Your refund is money CRA shouldn't have had in the first place.[/quote]
lol True, but if it keeps me from actually writing them a check out of money I already have it's more like a blessing in my opinion. I just sent them my last payment for taxes due last year, so anything is better then that.
Probably means I need to try and file both US and CDN myself and hold off the US until I know if I'm going to have to change things to match the CRA. If I move the date I assume that will mean a drastic change to my 1040 as well.
Your US return will hardly be affected by what you do on your Cdn return. The added income and tax you will pay on your Cdn return will be on US-sourced income, and thus won't affect your foreign tax credit or exclusion on your 1040 -- except for small shifts in percentages.
You should do bothe returns together of course, but you won't have to wait until your Cdn return is 'settled' before knowing fairly accurately what your US txes will be for the year.
You should do bothe returns together of course, but you won't have to wait until your Cdn return is 'settled' before knowing fairly accurately what your US txes will be for the year.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best