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,

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.


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


"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.