Selling Vacant lots in Nova Scotia - Steve Peters KPMG -

 

My parents are US Citizens.  In the 1960's they purchased land in Yarmouth, NS.  They still own this vacant land.  It has never been developed, built on or subdivided.  They now wish to sell this vacant land.  There are four lots, one of which is water front.
 
How do they go about this, I mean I know they list with a realtor, but once it is sold they have questions about capital gains etc.   My father is 76 and my mother is 72.  Are there any tax exemptions for seniors etc.  The value at the time they purchased it (1965) is was valued at $600 it is now assessed for taxes at $7,000.  They hope to sell it for $15,000-$20,000 (Canadian).
 
If they owe taxes, do they owe in both US and Canada.  Don't our two countries have some sort of tax treaty so you don't get hit twice.  Not sure.  They are both on US social security with no other income.  I went to the Canadian Tax Revenue site but got lost!
 
 
Any advice is appreciated.
 
Thank you,
 
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david ingram replies:

The amounts are so low that it is hard to believ that you can buy 4 lots with one on the water in Yarmounth for $20,000.  Luinenburg is much more expensive.

However, there are some items that have to be brought to your attention.

1.   Canada did NOT tax capital gains until Jan 1, 1972. There was a 'step-up' in value for that day.

2.   Article XIII(9) of the US / Canada Tax treaty exempts a US resident from capital gains tax in Canada until Dec 31, 1984. therefore, your parents can theoretically exempt any profit to that date.

3.   The US will tax from tax from day one in 1965 but allow a foreign tax credit on form 1116 for any tax paid to Canada.

SO!

When sold, they need to file form T2062 within 10 days to determine the withholding tax by Canada.

CANADA

"THEN", they need to file a Canadian Tax return with schedule 3 each to report their share of the profit from Jan 1, 1985 to the date of sale.

This tax will be about 25% of one/half of the profit./

"USA"

"THEN" They file their US tax return with Schedule D to report the profit and if there is US tax to pay, they will claim a foreign
tax credit on US form 1116.

If you are in Nova Scotia, Steve Peters at KPMG in Halifax is good at this. 

If you are not in Nova Scotia, you might as well send it to us as you will go crazy trying to find anyone who truly understands the system and method.
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david ingram wrote:
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David Ingram's US / Canada Services
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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."
 
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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. 
 
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