Canadians Selling and Buying in Same State

Snowbird56 · Post by **Snowbird56** » Thu Dec 08, 2016 1:19 pm

As Canadians, if we were to sell a property in Florida and use the proceeds to buy another property in Florida, what kinds of taxation would occur? I have read about the taxation if a Canadian property owner is just selling but I can't find anything about seliing and buying again. Would we have to pay capital gains on the sale of our current property before purchasing elsewhere in Florida? Kind of important for us, as retirees, to know how much we have to invest in the next property! :?

nelsona · Post by **nelsona** » Thu Dec 08, 2016 4:21 pm

For IRS rules, you are allowed to buy an INVESTMENT (rental) property with the proceeds from a pervious INVESTMENT (rental) property, and not have to pay immediate tax on the gains. It is known as a 1031 sale or in-knd transfer. The gain is just built-in to the next property until that one is sold, etc.

If your property is not a rental, then this does not apply to you. Also, the rules for the transaction are very strict.

However, since you live in Canada there is no point in attempting a 1031 transfer in kind, even if such a sale/purchase was qualified, because Canada does not allow this process. You will be immediately taxable on the gains from the first property. You would therefor want to also be taxed in US on the gain in order to use that tax as a credit.

nelsona · Post by **nelsona** » Thu Dec 08, 2016 4:23 pm

by the way, 1031 has nothing to do with buying in the same state. as long as the 2 qualified properties were in the same country, then the 1031 could be possible.

Snowbird56 · Post by **Snowbird56** » Thu Dec 08, 2016 4:35 pm

Thanks for the info! We do not have an IRS number as we have not used the property for rental purposes, just ourselves. So, what I gather from you is that we will have to pay the 30% capital gains on the sale of property #1, (perhaps getting a write-off from CRA in Canada) before we ever buy property #2. So, there will be a loss in order to relocate, is this correct?

nelsona · Post by **nelsona** » Thu Dec 08, 2016 5:31 pm

The tax should not be 30%. You are allowed to use the graduated taxrates for 1040NR (for each owner) to lower the tax.

As to the WITHHOLDING, there are some ways to avoid that, I would be talking to a tax pro in FL who deals with snowbirds.

At tax time, IRS gets the first kick at the taxes. Then you can use whatever you paid to IRS on your Cdn return against the cap gains arising form the sale.

Remember that when calculating the gain for CRA purposes, you use the buying price in c$ converted when you bought it, and the selling price in C$ converted when you sell it. Depending on when you bought sold, you could owe quite a bit in Canada when you only had a modest gain in US, because of the change in exchange rates.