Reporting Canadian Capital Gains in US

nelsona · Post by **nelsona** » Mon Mar 19, 2012 11:37 am

Btw, I just checked on this issue of spouse owninga home before marriage.

bottom line is that both of you wouyld have had to live there 2 years to get the full 500K, so you will be focused on using the treaty exemption I already described.

The issues you face is getting an accurate FMV for 2009 when she moved. Not impossible, but she needs to get this.
The other is she need to file a Cdn non-res return to figure out her actual tax on the 41K cap gain she made. That shoudl be easy, and I'm quite sure it will be less than $10K (but not much less)

Only then will you be able to figure out thr cap gains tax in US, ansd then use the fianl tax she paid in canada towards a credit on form 1116.

davfountain · Post by **davfountain** » Tue Mar 20, 2012 11:02 am

She did get a FMV on her home for some reason during the sale of her house. I don't have it in front of me, but seem to remember that it was about 760K.

Going to get some professional help with filing all of this, but it is good to know some of the things you have taught us. We appreciate it.

For some idea of what you are dealing with here, my background is that I have filed a 1040EZ my whole life and never wanted to be bothered any more than that. So I never had a clue about any of this.

Seems to me this is above the normal scope of a simple "tax preparer" so are we looking for help from a tax accountant? tax advisor? CPA? tax lawyer? Who can help us the best?

nelsona · Post by **nelsona** » Tue Mar 20, 2012 11:53 am

A cross-border specialist, as you need to adress both CRA amnd IRS concurrently. Unfortunately they are pretty proud of their work and will charge upwards of $1200 for a years worth of returns.

JGCA · Post by **JGCA** » Tue Mar 20, 2012 2:10 pm

To save some money you could have a CND taxpreparer file the CND non resident tax return first ,with the amount of tax paid on the cap gain, then give this to an ordinary CPA in the US to simply claim the FTC on this gain in the US. Sometimes I suggest this to my clients who are looking to cut down on my fees which as Nelsona says would run easily into the $ 1200 to $ 1500 range, this way you should be able to keep the cost down considerably.

nelsona · Post by **nelsona** » Tue Mar 20, 2012 4:01 pm

agrred, except that "this gain", in canada and US are calculated very differently and there is the trweay issue.

But certainly the client would not get $1500's worth of expertise for this rather small issue, but would be changred that much.

JGCA · Post by **JGCA** » Tue Mar 20, 2012 7:10 pm

In Canada the gain is taxed according to domestic rules so any competant CA could do it. I was already filed its just a mater of filing a non resident tax return and claiming back the tax owing that was over remitted at 25%. In US the cost basis is FMW upon arrival into the US ( treaty catagory filing) then you calculate the tax under normal IRS rules and of course take the FTC for CND taxes paid, your right if you go to a Cross Border guy you will pay more it seems to me that he could save money using a domestic accountant for each leg of the filings. Hey I would gladly do it for $1500 but I would never feel good about charging that much. So isn't he better off having it done by 2 guys for less, assuming of course each one of them is able to do it correctly under thier own domestic rules.

nelsona · Post by **nelsona** » Tue Mar 20, 2012 8:19 pm

Traety makes differnce. most US CPAs won't even look at the treaty. They think it dpesn;t aply to US residents (it's true!).

JGCA · Post by **JGCA** » Tue Mar 20, 2012 10:13 pm

Your right that most have no clue, I agree with that.