Sale of Arizona Property; Can proceeds be protected from Canadian Capital Gains Tax if re-invested into real estate again?


Dear David Ingram: Thank you for your E-mail of October 8 concerning Ontario
resident sold Lake Havasu Arizonia Property.

Clearly I need help in filling out and filing the proper forms and am glad
to know you offer this service. I am still wondering though, if there is
some way to save or defer some of this Capital Gains Tax if not all of it.

I have been reading Robert Kiyosaki's book Rich Dad, Poor Dad. It states
that the Tax Code of the U.S.A. allows ways to save on taxes by using a
Section 1031 of the International Revenue Code, which allows the seller to
delay paying taxes on a piece of real estate that is sold for a capital gain
through an exchange for a more expensive piece of real estate. As long as
you keep trading up in value you will not be taxed on the gains until you

I am sole owner of this property, have no income this year due to illness,
which is why I sold it in the first place. The escrow has closed and
proceed funds are being sent to me by UPS here in Canada. Is there any
provision available here in Canada, similar to the U.S. provision?

Looking forward to your input on this. Sincerely

david ingram replies:

The Section 1031 exchange in the US is not available in cross border trades
and no such animal exists in Canada unless the building / land has been
expropriated or was used as the base for an active business. In other words,
the Canadian rollover does NOT apply to residential or rental or vacant land

In either case, you have to reinvest in another property worth as much or
more of the price you sold the old property for. If you sold the property
because you needed the money, it is unlikely you will be reinvesting in
another property so it is likely a moot point.

You will have to fill out an Arizona 140NR, a US Federal 1040NR with
schedule D, and a Canadian T1 Income tax return with schedule 3 to report
the capital gain and Schedule 1 to claim a foreign tax credit for any tax
paid to the US and Arizona.

Wish I had better news for you.


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