BC Real estate inherited by non-resident - Expert Income Tax help on cross Border tax and immigration and divorce and RRSP

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xxxx xxxxxxxxx on Friday, April 23, 2010 at 14:05:43

My_question_is: Both

question: Dear Mr Ingram

I tried to watch your Around the World online live Video Cast April 21, but it did not seem to be available. My question about inherited real estate follows; I hope you find it interesting.

I am a Canadian who got a job in the US and became a US citizen. Currently I am unemployed.

In 2004 my mother died and willed me a condo in BC. I want to sell the condo because rentals are not permitted. In 2004 it was assessed at $114,000. It has been vacant since, and some of her personal belongings are still there. Fortunately, by 2010 the assessment has risen to $262,000

It has been inactive because my brother is the executor, and he did not file for probate until 2009. (We are on good terms.) So far, title to the condo has been transferred to the estate. There is a 2% hit with every transfer. The next step is to transfer title to myself, but I want your advice first.

I studied your archives. One of your replies was "If you own and live in another house, and mother's house was not rented out after her death, you have a choice of claiming mother's house tax free for the time from her death until you sold it or your own house tax free for the same time period." However, I am not sure it applies to a non-resident like myself.

So here are my question:

1) since the condo was neither rented, nor occupied by anyone but my mother, is it subject to Capital Gains tax?

2) is the cost basis taken at the date of death, or the date title is transferred?

3) how do I calculate my tax liability?

Thanks in advance.



david ingram replies:

I have suspended the Wednesday night show.  I ran out of time during this tax season. 

You can still phone Fred Snyder's Sunday morning program, "IT's YOUR MONEY". at 604-280-0650 from 9 to 11 AM Vancouver time.

You can listen (not watch) it at www.radio650am.com every Sunday.  I am a guest on the show most Sundays.  However, you can only get a quick question in.  It is not designed for 5 or 6 minute replies and is aimed at BC and / or Ontario residents because of Fred Snyder's licensing.

As to your questions:

1.   There is no capital gains tax up to the date of your mother's death. 

2.    The increase from $114,000 to $262,000 less a real estate commission and closing costs is subject to capital gains tax in both the US and Canada.

2a)   The tax you pay to Canada will be a deduction (likely $ for $) on your US return by filing US form 1116 with your US 1040.

3.   For Canada, you will file a return under Section 116, report the gain on Schedule 3 and put half of the gain on line 127 of the T1 Canadian return.

3a)  For the USA, you will convert the $114,000 Canadian to US funds as your cost price on schedule D and you will convert the sale price and costs to US dollars as the sale price.  Because of the change in exchange rates, you will receive significantly more profit in US dollars than you did in Canadian dollars.  This gain is subject to US capital gains tax.

4.   Because the inheritance is over $100,000, you also have to file Form 3520 as alluded to on question 8 at the bottom of Schedule B of your US return.

If you end up with signing authority on Canadian accounts totaling more than $10,000 or if you have been a signer on the estate since 2004, you also have to fill in forms TDF 90-22.1 as alluded to in Question 7 of Schedule B of your 1040.

And short of time as I am, I have no idea why I came to answer this. -- If you need help with the paperwork, you know where we are.  The same person should do the US and Canadian returns at the same time.

If your question was not answered fully or you wish to go further, I am available for individual consultations by phone or email or in person for $450 per professional hour. 

Please also note that we prepare Canadian, US, Australian, UK and New Zealand returns on a mail in, email, fax, snail mail or couriered basis. At any time, our clients are in 40 countries or more.  They have every occupation from nuclear Submarine captains to FedEx pilots to Major Bank officers to Politicians, Diplomats and border patrol officers.  My favourite, however, is a penguin catcher in Antarctica among others there..

If you 'really' only have a single question requiring a 'couple' of minutes, you can try phoning me for free as part of the following.

- For a quick free question

You might try calling Fred Snyder's radio program for an answer on a Sunday Morning.. 

Fred Snyder's  "IT'S YOUR MONEY" radio show. on CISL,  650 AM on the dial in Vancouver from 9 to 11:00 AM every Sunday  (604) 280-0650 or (877) 280-0650 - You can listen live from anywhere in the world at www.am650radio.com from anywhere in the world. click on the button in the top left hand corner.
You might try calling Fred Snyder's weekly radio programs for an answer. 
  1. Circular 230 Disclosure: Pursuant to recently-enacted US Treasury Dept. regulations, we are now required to advise you that, unless otherwise expressly indicated, any federal tax advice contained in this communication, including attachments and enclosures, is not intended or written to be used, and may not be used, for the purpose of (i) avoiding tax-related penalties under the internal revenue code or (ii) promoting, marketing, or recommending to another party any tax-related matters addressed herein.

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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 or www.garygauvin.com.  If you forward this message, this disclaimer must be included."

david ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
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North Vancouver,  BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
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David Ingram gives expert income tax service & 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.



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