Capital Gains in Canada?

stagerdc · Post by **stagerdc** » Tue Mar 27, 2007 9:15 am

It is my understanding that there is no capital gains tax when you sell your primary home residence in Canada. My question involves the length of time you have to live in this home in order to avoid paying capital gains when you sell your house.

I heard a spokesperson on a radio program say that the laws are not clear on any specific length of time, but that Canada Revenue will look at the purpose of the sale, i.e., are you selling to make a profit or selling because you are moving, etc.

I appreciate the expertise of the people posting here and if any of the Serbinski experts can provide some general guidelines in this area, I'd like to know what I need to do to sell my primary home and not pay capital gains.

nelsona · Post by **nelsona** » Tue Mar 27, 2007 9:59 am

What you heard on the radio is correct. Remember, though that if you are taxable in US (otherwise, why would you be posting here) you ALSO need to meet the 2 year IRS requirement (or other exemption).

stagerdc · Post by **stagerdc** » Tue Mar 27, 2007 10:48 am

So, in order to avoid capital gains in the USA on the sale of my home in Canada, I have to live in the Canadian home as my primary residence continuously for two of the past five years? Isn't that the American rule?

stagerdc · Post by **stagerdc** » Tue Mar 27, 2007 10:51 am

... or the capital gain on the Canadian sale must be less than the US$ 250,000 personal individual exemption. Sorry for multiple posts. I'm remembering bits and pieces as I type.

stagerdc · Post by **stagerdc** » Tue Mar 27, 2007 10:56 am

... should read AND the capital gain is less than US$ 250,000, right? So, two years out of five and less than $250,000 capital gains.

Can a 1031 transfer be done on move within Canada or does it have to be from Canada to the USA or completely within the USA. I suppose the issue will be finding a proper agent to complete the transfer within the rule.

nelsona · Post by **nelsona** » Tue Mar 27, 2007 11:14 am

As I said, there are certain exemptions avalibale for US taxpayers selling their home early, which would give you a reduced cap gains exemption.

Point is, for your sale to be completely tax free, it has to meet the criteria of both countries. Location of the residence is not important forUS rules. Unless you are flipping houses every 6 months, your home sale will be tax-free in canada. Its the US rules you need to look at.