Time: 09:32 AM -0800
QUESTION:
My aunt is a U.S. citizen who married a Canadian man and moved to Toronto 20
years ago-- she has landed immigrant status in Canada, and works and resides
there full time.
She owns a small vacation cabin in Cape Cod, Mass that is appraised at
$850,000 USD, and she is looking to sell it quickly because her husband is
terminally ill and needs money for medial expenses. Moving to the States for
a while and claiming the Cape house as her primary residence is not an
option because of her husband's illness.
This land has been in our family since it was purchased in 1940 by her
father. She inherited it in the 1980's and has been paying property taxes to
the US on it since then.
What can she do to keep as much of the money from the sale as possible? She
was told that she would be taxed up to 40% between the US and Canadian
governments when she sells. Is this true, and is there a way for her to
retain more of what she makes on the sale?
Thanks very much for your consideration.
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david ingram replies:
Your aunt should have been filing a US return for all the time she has been
in Canada.
When sold, she will owe the US government 15% of the profit between the
value she inherited it at and the sale price.
Canada will also want its due.
Canada will want to tax one half of the gain from the day she inherited it
or (if she moved to Canada AFTER inheriting it) the gain from the day she
moved to Canada. Canada will tax One half of it at about 22% (roughly - not
absolute). Canada will also give her credit for most if not all of the tax
paid to the US. There is a policy where the CRA was only allowing 1/2 of
the foreign tax paid because Canada was only taxing half of the gain.
However, this ill-planned tax seems to have gone sideways and she can expect
to receive full credit. If she does not receive full credit, she would be
paying the equivalent of about 29 1/2 percent tax. If she gets full credit
as I expect, she would only be paying 22/23 %.
david ingram
we, of course, are ideally situated to look after the Massachusetts and US
and Canadian returns for her. Your aunt should also apply for her Canadian
Citizenship as soon as possible.
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