Principal Residence Exemption sale of US Condo
Moderator: Mark T Serbinski CA CPA
Principal Residence Exemption sale of US Condo
I sold my US condo and claimed it as my principal residence for Canadian tax purposes. I'm filing my 1040NR to claim back the withholding tax. I've heard that if I'm not taxed in Canada on the gain then I'm exempt on that gain in the US. How do I report that exemption on the 1040NR? I'm a Cdn resident/citizen and a non-US citizen.
You *might* be exempt on the gain in US, however it has nothing to do with whether you are taxable in Canada or not, since the rules for exemption are completely different in both countries, and there is no treaty provision that would make your US condo exempt.
Your gain will be exempt in US only if it was your MAIN HOME for 2 of the last 5 years, it was never rented out, and the gain was less than $250K.
US doesn't care if your main home was a rental or owned, so you need to provide proof that the condo was your actual home. This will be difficult if you have never filed a 1040 with a US address.
This is different than the Cdn requirement, which is simply that you wre a Cdn resident and you do not claim any other residence as your principle residence for that period.
Your gain will be exempt in US only if it was your MAIN HOME for 2 of the last 5 years, it was never rented out, and the gain was less than $250K.
US doesn't care if your main home was a rental or owned, so you need to provide proof that the condo was your actual home. This will be difficult if you have never filed a 1040 with a US address.
This is different than the Cdn requirement, which is simply that you wre a Cdn resident and you do not claim any other residence as your principle residence for that period.
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US Gain
I thought there was something in the US/Canada treaty that if income was not taxable in one country, say Canada, then it is non-taxable in the US. I pulled up the treaty on the Cdn Dept of Finance web site but couldn't specifically find that type of clause.
Since it may be unlikely that the gain is exempt in US, you may wish to rethink your choice of declaring it your principal residence (PR) for Cdn purposes, especially if you have another property that could qualify.
Then you would merely report the gains in both countries, and get credit for the US and state tax you paid on your Cdn return, preserving your PR exemption for another time.
Even though you may not qualify for the exemption in US, depending on the gain in US dollars on your 1040 my not be that much. You could then decide that exempting the condo in Canada would still make sense.
But, to be clear, there is no "if it isn't taxed in Canada, it isn't taxed in US" rule on this transaction.
Then you would merely report the gains in both countries, and get credit for the US and state tax you paid on your Cdn return, preserving your PR exemption for another time.
Even though you may not qualify for the exemption in US, depending on the gain in US dollars on your 1040 my not be that much. You could then decide that exempting the condo in Canada would still make sense.
But, to be clear, there is no "if it isn't taxed in Canada, it isn't taxed in US" rule on this transaction.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing