Capital Gains on Sale of Canadian Property by US Resident

[Texas Red Sox Fan]

I am a Canadian citizen living in the US for more than 10 years. Status in the US is Legal Permanent Resident. Approximately 4 years ago I acquired a 1/3 interest in our family farm from my father along with my sister and brother who are Canadian residents. We are in the process of selling the farm and I am finding it difficult to determine the capital gains responsibilities I will have to both Canada and the US as a result of the sale. Your insight and advice is greatly appreciated.

[nelsona]

You are responsible for Cdn tax on your share of the cap gains from the time you acquired the property until you sold.

So, you need to know the fair market value at the time your father sold it to you. I assume that this information is readily available and that some for of legal transfer occured back then.

As a US citizen you are also responsible for US cap gains on the same amount.

As a non-resident of canada you are also required to notify CRA BEFORE sale, so that you can comply with some non-resident filing requirements. Forms T2062 and T2062A.

Whether or not tax is withheld from the sale of the property, at year end you will file a Cdn non-residsnt tax return to report the sale, the gains and settle up on the tax.

You report the sale as you would any other sale of prpoerty on your 1040. The tax calculated on the Cdn return will be used as a credit (FOrm 1116) on your 1040.

[nelsona]

I shopuld mention that your tax liability in canada may be affected by the manner in which the transfer was made to you. no doubt some or all of the transfer was made using Section 73 of the income tax act, which simply put, transfers some or all of the cap gains of your father to you and your siblings.

You may have a higher cap gains in Canada. The calculation in US should still be based on the FMV at the time of transfer, regrdless of the Cdn treatment.

[nelsona]

Oh yes. I assume you were still living in canada when the transfer occured. That would simplify things, as you must have been to be able to use the provisions of section 73.

See CRA IT_268

http://www.cra-arc.gc.ca/E/pub/tp/it268r4/it268r4-e.pdf