Sold my house in Canada...next steps?

hellomister40 · Post by **hellomister40** » Wed Dec 02, 2015 5:17 pm

Hi Gurus,

I have been living in the US since Jan-2015. As stated in previous posts, I had been trying to sell my Canadian principal residence over the course of the calendar year 2015. Thankfully, it is all taken care of now and as of right now, I do not own any more property in Canada.

When the Real estate lawyer settled the transaction, he pointed out that because I am a non-resident of Canada, I need to get a tax certificate from CRA http://www.cra-arc.gc.ca/E/pbg/tf/t2062/README.html within 10 days of sale and held back 25% of the proceeds.

Q1) While looking at the link above, it asks me to fill in T2062 and calculate Net gain/loss. Since this is my primary residence, I set this to 0. Also, I set Adjusted Cost Base to the actual purchase price from the time I bought the property. Let me know if you see any issues here

Q2) Form's T2062 checklist asks for submission of copies of most recent tax returns in treaty country and a letter from tax authority in the treaty country confirming their residency status. In my case, in April-2016, it will be the first time that I'd actually be filing US taxes. Will a letter explaining this to CRA that I don't have any tax returns in the US yet suffice?

Q3) Next, in the checklist for T2062, it mentions that I should include T2091(IND) and T2091(IND)-WS since I am declaring my property as a Principal residence. However, when I read those forms [T2091(IND) , it says "Attach one copy of this form to your return only if a capital gain has to be reported". Since this was my principal residence, I am assuming I do not have to attach either of T2091(IND) or T2091(IND)-WS and a letter to this effect should be enough. Can you help confirm?

Thank you everyone for your help!

nelsona · Post by **nelsona** » Wed Dec 02, 2015 5:53 pm

1. Correct. However the purpose of these forms is so that NOTHING is withheld. Your exemption should be all of the gains. I hope that I've misread your sentence and that nothing was withheld from the sale. He should have had this form prepared ahead of time, so tha tnothing would have been withheld.
2. A note will suffice.
3. You are not selling your principal residence, you are selling what WAS your principal residence until jan 2015. You still must account for the period since then. Thus the form must be sent. Besides, the instructions refer to attaching this to your return. This copy of the T2091 is submitted for T2062 purposes. When you submit your 2015 departure return, you won't need to attach the form, since you will have no cap gains.

hellomister40 · Post by **hellomister40** » Wed Dec 02, 2015 6:15 pm

Thank you Nelsona. The real estate lawyer only asked me since when did I start living in the US and I told him Jan-2015. At that he said that 25% of the selling price will be withheld until I provide them with a tax certificate. I closed the house on Nov-30th and will be filing the form asap.

Thank you for clarifying the "you are selling what WAS your principal residence until jan 2015" point. I am happy though it got sold within the first year of my move to the US since as you had indicated in one of the earlier threads, there wont be any tax due on the sale as long as I sell it within a year of move

Thanks again

nelsona · Post by **nelsona** » Wed Dec 02, 2015 8:10 pm

has the lawyer withheld the tax in an account or has he forwarded it to CRA. IF the latter, you won't be getting it back until Aug/Sept next year.

hellomister40 · Post by **hellomister40** » Thu Dec 03, 2015 9:54 am

Hi Nelsona...thankfully he withheld in an account (not yet fwd'd to CRA). I appreciate all the advice. I am working on the worksheets as we speak and will likely have a couple of follow-on questions. Will post shortly...

Btw, I reached out to my tax accountant in Canada and his response was:

"There will be capital gains based on the increase in Fair Market value from either the time you left Canada or the time your family did. You will need an evaluation from your realtor based on the most advantageous date. That will be your ACB."

I am assuming his statement is more generic in nature though that capital gains may have to be realized if someone sells their property >1 yr after leaving Canada. This said, do you think ACB is fine to be set to the actual purchase price (I bought the house in 2008) or the price of property in Jan-2015 (which is when I left Canada) or April-2015 (which is when my family moved)

nelsona · Post by **nelsona** » Thu Dec 03, 2015 10:26 am

I try not to assist in filling forms, you can figure that out.

The equation for figuring taxable gain, when your property was at one time your principal residence is: ENTIRE GAIN * [1- (p+1)/t].
where p=years your home was your PR
and t = years you owned your home.

You can use months if you prefer, "p+1| becomes "p+12".

See: http://www.cra-arc.gc.ca/tx/tchncl/ncmt ... tml#N1040E

In other words, you always get a free year when calculating taxable gain. that is why you have one year to sell without any worries at all.

So, in your case there is little point in worrying about ACB, just pick your buying price. Your exemption will be 100% of any gains you made regardless. but it is definitely not the value when you moved. He was wrong on that issue.

Looks like your tax accountant is not the sharpest. Be careful when he prepares your departure return.

And I really need to reiterate, ypur situation is not unusual, please try to find information on this site before posting questions.

hellomister40 · Post by **hellomister40** » Thu Dec 03, 2015 10:59 am

Thanks Nelsona...its all clear now. I have one more question...doesn't apply to me but to a friend of mine.

He moved to the US earlier this year, however, his family still lives in Canada. Say (for argument sake), they keep this arrangement for another 2 years, at the time of disposition, will they be able to claim tax exemption if one of the spouses has been treating their home as P-residence? I think the answer is yes but just wanted to confirm

nelsona · Post by **nelsona** » Thu Dec 03, 2015 11:47 am

The spouse will be able to claim exemption, but only on her portion of the gain.

Remember, that when a couple sell their principal residence, they BOTH are splitting the gain, and then BOTH using the PRE to exempt the gain from tax.

She, by remaining resident, can use the exemption for the entire period of ownership. He cannot, since the exemption requires one be resident.
He would apply the formula I described above, making some of the gain taxable for him.

Remember too, that if his period of ownership exceeds 3 years after becoming US resident, he becomes taxable on the entire gain (his portion) from the time he left Canada.

hellomister40 · Post by **hellomister40** » Thu Dec 03, 2015 11:48 am

thank you sir

hellomister40 · Post by **hellomister40** » Sat Dec 05, 2015 4:14 pm

hi there...I have all the forms and documentation ready and am all set to send to CRA. I have just one pending confusion and will appreciate any clarity:

T2062 - Column-4 asks for exemptions. Since I sold the house within the first year of departure itself, I entered the entire gain amount as exemption ($75000). The form's instructions mention the following: "You cannot claim outlays and expenses related to the disposition of property, including real estate commissions, brokerage fees, and legal and notary fees when you file this form. However, you can claim these amounts when you file your Canadian income tax return". So In column-1, I simply used selling price, column-2...purchase price and did the subtraction (simple)

However, in T2091 - actual calculations ask if there were outlays and expenses. All in all, with real estate commission and lawyer fees, it came out to $25000. That reduced the gain from 75K to 50K. This is where I am confused. Is it expected for the gain amount on T2091 to be different from T2062? Will the CRA understand this ok?

T2091(IND)-WS - this one is pretty much 0's everywhere since I acquired the property in 2008. What is event he point of this form for properties acquired after 1995?

Thank you for the help.

nelsona · Post by **nelsona** » Sat Dec 05, 2015 7:59 pm

I think you can figure this out.

hellomister40 · Post by **hellomister40** » Fri Jan 08, 2016 12:50 pm

Just an fyi in case someone else finds themselves in this situation...I called CRA asking for a status on T2062 that I had submitted. Turns out they are taking a whopping 27 weeks to process it! Clearly they are in no rush :)