Inheritance Tax fORM T2091 TO CLAIM PRINCIPAL RESIDENCE TAX FREE PART -
QUESTION:
Is there a inheritance tax on Canadian estates. the estate has a family cabin on a lake it is worth 500,000.00. It is the parent permit home they collect a home owners grant on the property.
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Canada does not have an inheritance tax.
Canada DOES have a capital gains tax on any increase in the value of assets from the purchase cost to its deemed value on the date of death.
The exception is the Family home which can be a boat you live on with a piece of land for moorage, a trailer or mobile home on a lot, a cabin, a ski chalet or a house in the centre of town BUT only ONE of those. So, if mom or dad only has a cabin and lives in a rental property, the cabin can be the tax free residence. OR if you have a house in town but the waterfront cabin went up more in value, you can claim the cabin tax free and pay the capital gains tax on the house in town.
If the person had both and sold the house in town four or ten years ago and moved into the cabin, and they had claimed the house in town as their tax free residence in the past, they would owe capital gains tax on the cabin for the time period that they had claimed the house in town tax free.
You would use from T2091 to calcualte the taxable amount.
The following question speaks to it and gives links to the forms. Note that it suggests no gains in Manitoba. Not today, Sept 11, 2007. I just came back from a funeral in Portage la Prairie and everything in Manitoba seems to have doubled in the last few years.
My question is: Canadian-specific
QUESTION: We purchased beach front property in Manitoba, Canada 9 years ago. The cost was $18,000. We have received an offer to purchase the land for $500,000 U.S. We would like to know what kind of tax breaks we can use to not have to give half of it away to the Canadian government.
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david ingram replies:
QUESTION: We purchased beach front property in Manitoba, Canada 9 years ago. The cost was $18,000. We have received an offer to purchase the land for $500,000 U.S. We would like to know what kind of tax breaks we can use to not have to give half of it away to the Canadian government.
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david ingram replies:
The good news is that Canada only
taxes 50% of the profit at your marginal tax bracket. That means that the
most you will pay is about 25% of the profit. You should be feeling better
already.
I cannot tell if this property had a
home on it. If it did, the whole thing can be tax free because you can
designate either your house in town OR your recreational cabin as your tax free
prinicpal residence. This would be true if you only had a trailer on
it.
The downside is that you would have
to pay Capital gains tax on any increased value of your town home.
However, there is no possible way
that a Winnipeg, Brandon, Portage La Prairie, Selkirk or Minnedosa house
went up at a comparable rate.
If you did build a house and the
value is on your principal residence, you would file form
T2091
The worksheet is
at:
But, if you just left this land vacant for the 9 years, it is taxable.
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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"
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