Subject: Sale of property in Canada by a non-resident
Expert: taxman at centa.com
Date: Sunday March 11, 2007
Time: 07:33 PM -0500
QUESTION:
My wife and I are planning to sell our home in Nova
Scotia, which we have owned for six years. We are both
residents of New York State and are American citizens (my
wife, however, was born in Canada and still has a
Canadian passport, and her mother still lives in Nova
Scotia). Question: do we have to pay capital gains or any
other taxes on the disposition from the sale? I understand
there are exemptions from taxes if the home is a primary
residence (which, as far as Canada goes, it certainly is) or
under tax treaty with the U.S. Would we qualify on either
of these counts or would we have to pay the punitive 25 %
tax? thank-you
____________________________________________________________________________
david ingram replies:
The home is taxable in Canada because you are not residents of Canada.
When you have a sale arranged, file forms T2062 and T2062A to get the tax reduced from 25% of the gross sale price to 25% of the actual capital gains realized on the sale.
When filing the T2062 and T2062A you can not deduct any legal or real estate costs so more tax is usually dedcuted than will be calculated on the actual tax return.
Then in March or April of Next year you will both file a T1 return to report the sale and you can then claim any sales costs and will get a refund at that time.
You will report the sale again on your US 1040 schedule D and your New York IT-201. You claim the tax paid to Canada as a tax credit on US form 1040.
Depending upon the profit, You will have paid Canada 23 to 44% on 1/2 of the profit. If the profit is less than $100,000 your actual tax will be about 12%. At the same time, the US tax will be 15%.
Form 1116 will/should give you full credit for the tax paid to Canada on your US federal return unless the rest of your US income is very very low.
Filling in these forms is what we do and we are happy to look after the Canadian New York and 1040 at the time if your accountant does not understand them which is quite likely. You can send them by fax, email, snail mail or courier. If you did not want to deal with us, Steve Peters in Halifax with KPMG is also more than capable of helping you but more expensive. Gary Gauvin in Dallas Texas can also do them. I do not know of anyone in New York who deals with cross border issues.
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david ingram wrote:
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David Ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
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Calls welcomed from 10 AM to 9 PM 7 days a week Vancouver (LA) time - (please do not fax or phone outside of those hours as this is a home office)
email to taxman at centa.com
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Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist for expert help, assistance, preparation, or consultation in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
Be ALERT, the world needs more "lerts"
David Ingram gives expert income tax & immigration help to non-resident Americans & Canadians from New York to California to Mexico family, estate, income trust trusts Cross border, dual citizen - out of country investments are all handled with competence & authority.
Phone consultations are $400 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or a phone consultation is in Canada.
This is not intended to be definitive but in general I am quoting $800 to $2,800 for a dual country tax return.
$800 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
$1,000 would be the same with one rental
$1,200 would be the same with one business no rental
$1,200 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes.
$1,500 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits no move in or out
$1,600 would be for two people with income from two countries
$2,800 would be all of the above and you moved in and out of the country.
This is just a guideline for US / Canadian returns
We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $150.00 up.
With a Rental for $350
A Business for $350 - Rental and business likely $450
And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return.
Moving in or out of the country or part year earnings in the US will ALWAYS be $800 and up.
TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return.
8891 forms are generally $50.00 to $100.00 each.
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
Capital gains *sales) are likely $50.00 for the first and $20.00 each after that.
Just a guideline not etched in stone.
This from "ask an income trusts tax and immigration expert" from www.centa.com or www.jurock.com or www.featureweb.com. David Ingram deals on a daily basis with expatriate tax returns with multi jurisdictional cross and trans border expatriate problems for the United States, Canada, Mexico, Great Britain, United Kingdom, Kuwait, Dubai, Saudi Arabia, Thailand, Indonesia, Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK, GB, and any of the 43 states with state tax returns, etc. Rockwall, Dallas, San Antonio Houston, Denmark, Finland, Sweden Norway Bulgaria Croatia Income Tax and Immigration Tips, Income Tax Immigration Wizard Antarctica Rwanda Guru Consultant Specialist Section 216(4) 216(1) NR6 NR-6 NR 6 Non-Resident Real Estate tax specialist expert preparer expatriate anti money laundering money seasoning FINTRAC E677 E667 105 106 TDF-90 Reporting $10,000 cross border transactions Grand Cayman Aruba Zimbabwe South Africa Namibia help USA US Income Tax Convention
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