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Dear David
My wife and I are senior citizens living in West Vancouver but we own property in the United States. Our primary residence is a house here but we also own a condo in Scotsdale where we vacation in the winter.
We also used to own a building lot in Point Roberts which we just sold at a loss after owning for ten years. It had been our intention to build a vacation residence on this property for our own use and that of our family members.
We are or were paying mortgage payments on each of these properties.
We each file a Canadian tax return each year but have never filed a US tax return. We do have US social security numbers and file the Closer Connection form.
We are especially careful to limit our stays in the US including day trips to under 180 days each year.
We understand that when we sell our condo in Scotsdale, we will have to file a US tax return. Our question is whether we should file one now to establish our loss on the sale of our building lot and will this offset any of the gain on the eventual sale of our Scotsdale condo.
Thanks.
SXXXXXX XXXX
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david ingram replies:
Yes, you must file a US return. Assuming that you both owned the property, failure to file your US 1040NR returns to report the sale of the lot could result in a minimum fine of $1,000 US each for failing to report the sale.
You also will get the benefit of the loss to carry forward to your hopeful profit on the Palm Springs Condominium.
You will also file it on your Canadian Returns and show it as a loss under "Listed Personal Property" on Schedule 3.
The same situation applies for Canada. You will be able to carry that listed personal property loss forward to a hopeful profit from Palm Springs.
Your statement that the lot was to used for a vacation property is what makes the capital loss a restricted loss which can only be used against a "like kind" profit.
If it was just a lot bought for investment, the loss could have been used against mutual fund or other capital gains.
Hope this helps
Yours
David Ingram of the CEN-TA Group
US / Canada / Mexico tax and working Visa Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 913-9133 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
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