I am a dual citizen filing both US and Canadian tax returns but resident in Canada. A US investment company is asking for a consolidation of participation shares in buildings into a multi-building US REIT. They are telling American investors that capital gains tax may be deferred in the US because the new shares may be obtained mostly in Operating Partnership Units of the REIT = tax deferred that is until sold. But if Canada taxes half the capital gains regardless, the tax would be so high that the units would have to be at least partially sold at the end of a 6-month lockout period.
The capital gains as I understand them would be realized even though no actual sale would have taken place since the conversion of shares in itself would trigger Canadian taxation. Or does Canada allow special status for operating partnership units, too?
US REIT
Moderator: Mark T Serbinski CA CPA
Under certain circumstances, property can be transferred to a corporation or to a partnership on a taxdeferred canadian tax basis. However, the Income Tax Act does not provide similar tax-deferral provisions for Canadians in Canada that have property or who are tranf them to a REIT ( a Trust for CND purposes) . So you in effect have sold your units to a trust at FMW so
transferring property to a trust (whether open- or closed-ended). A vendor will be subject to tax on any capital gains and recapture of capital cost allowance realized on the transfer of property to the trust. So this is why you are deemed to have sold it at FMW in Canada.
transferring property to a trust (whether open- or closed-ended). A vendor will be subject to tax on any capital gains and recapture of capital cost allowance realized on the transfer of property to the trust. So this is why you are deemed to have sold it at FMW in Canada.
JG