Canadian moved out of condo and moved to the US - Now

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----- Original Message ----- 
From: DXXXXXXXXXXX 
To: 'David Ingram at home - bus at [email protected]' 
Sent: Wednesday, October 01, 2003 8:11 AM
Subject: RE: Canadian moved out of condo and moved to the US - Now wants to sell it.
My tenant and I have not yet come to an agreement on price, so this is obviously the first step. Once we have agreed on the sale price, how do we proceed? It seems that the purchaser and I need to fill out a purchase agreement. Since I have never sold real estate before, I do not know where to get a purchase agreement, etc. At what point do you or David Stoller step in? Who will take care of getting a "fair market assessment" of the property on the day we moved out? Are taxes due to disposition due *before* we close on the sale of the property? We would like to get started on this right away.
Thanks,
DXXXXX
============================
david ingram replies:
Send me an address and I will send you a sample Real estate offer form. I hate to say it but maybe you should use my real estate services.  If so, I will make a 1% deal with you as the agent.  there are "no" cheaper deals anywhere and I hold the highest level real estate licence available and 39 years experience in cross border real estate deals.
Note that 1% is not an advertised fee - It is offered because you have found the buyer and there is no adveritising, no driving, no open houses and no MLS listing fee.  
I can arrange for the Fair Market Value on the date of move appraisal.  I would have someone else do that because I should not be involved when doing the tax return as well. However, although I do not operate as an appraiser because there is a limit,  I have taken the UBC and CREA CMA appraisal courses and will tell you whether I agree or disagree.
For other readers, the rest of the story is below.
When we have a value, we file a T2062 and determine the withholding tax (if any).  The tax would be remitted by the lawyer handling the transaction.
Then we would have to file a 2003 tax return for the rental and the sale. Because the withholding tax calculated on the T2062 does NOT take the real estate commission into account, there is usually a small refund. (although a 1% (as opposed to 5%) commission is not going to make a big difference).
  
David Stoller's phone number is (604) 922-4702 by the way. Tehre is no need toi cross the border to deal with any of it.
david
  -----Original Message-----
  From: David Ingram at home - bus at [email protected] [mailto:[email protected]]
  Sent: Sunday, September 21, 2003 4:32 PM
  To: 
  Subject: Re: Canadian moved out of condo and moved to the US - Now wants to sell it.
  Too tough to answer because the CCRA can hold these things up with questions and more questions. Usually, they just go through but a recent one took thirteen different letters and forms to Revenue Canada before they were satisfied.  
  However, assuming it goes smoothly, I would imagine that the whole thing including T2062's and the lawyer's fee (asuming David Stoller did it and our fee would be $2,000 or less in Canadian funds plus any PST and GST taxes and actual disbursements. 
  ----- Original Message ----- 
  From: To: [email protected] 
  Sent: Thursday, September 18, 2003 8:22 AM
  Subject: FW: Canadian moved out of condo and moved to the US - Now wants to sell it.
  Hi David,
  Sorry to bother you again, but I was wondering if you could provide at least a rough estimated breakdown of the costs we will incur (from yourself or elsewhere) on the sale of our condo to our tenant (both real-estate-related and tax-related). We would like to reduce/eliminate the need for real estate agents in this transaction since I would be selling to my tenant directly, and would like to cut out the middleman as much as possible. Honestly, I am not sure exactly what legal/professional assistance we require in a case like this, so any feedback would be appreciated. We just want to keep it simple and cost-effective.
  As well, could you explain "how" we would go about this? Due to my current immigration status in the U.S., I am unable to reenter the U.S. if I visit Canada, so a face-to-face meeting is not possible for at least many months.
  Thanks,
  DXXXXXXXXXXXXX
  Too tough to answer because the CCRA can hold these things up with questions and more questions. Usually, they just go through but a recent one took thirteen different letters and forms to Revenue Canada before they were satisfied.  
  However, assuming it goes smoothly, I would imagine that the whole thing including T2062's and the lawyer's fee (asuming David Stoller did it and our fee would be $2,000 or less in Canadian funds plus any PST and GST taxes and actual disbursements. 
  -----Original Message-----
  From: Sent: Thursday, September 11, 2003 7:37 AM
  To: 'David Ingram at home - bus at [email protected]'
  Subject: RE: Canadian moved oout of copndo and moved to the US - Now wants to sell it. Ask an expert experts advsor advisors consultant consultants
  Thanks for the prompt reply, David.
  Would you have any estimate of the fees for your services (including any 3rd party fees)? How would we exchange information? Can it all be done without having to meet face-to-face?
  And to clarify one point: we have already paid the $4000 special levy (for several defective balconies) earlier this year. I am unclear about the whole "capitalization" you are referring to. It is my understanding that the levy treated as a "repair", not an "improvement". My net income BEFORE CCA is roughly $2000 per year, so I just claim enough CCA (roughly $2000) to get my total tax back to $0. This year my net income before CCA will be -$2000 (with the $4000 levy factored in), so I will not claim any CCA, but have no way of writing off the additional $2000 (and cannot cary it forward). My thought was: can I write this off against the capital gains from the sale of the condo (if we sell it this year)? It sounds as though you are saying "no", but I want to make sure, since it would be yet another incentive to dispose of the property this year.
  One other question: we have been claiming CCA for our Canadian returns (which was "optional"), and depreciating the property (using the 40-year straight line method) for our US returns (which was "mandatory") each year, in a sense getting a "double" benefit. Now when we sell, as I understand it, we calculate the tax for Canada purposes, and then we will calculate the tax for US purposes, and be able to claim credit for the Canadian tax paid on our US return (through the tax treaty). If so, it seems like we come out way ahead from a taxation perspective. I attempted to get clarification from an IRS agent about this within the past year or so, and they did not see a problem with this issue, but I have been given bad advice from the IRS in the past. Is there anything wrong with my line of thinking? It almost seems "to good to be true".
  Thanks again,
  DXXXXXXXXXXXX
  ----Original Message-----
  From: David Ingram at home - bus at [email protected] [mailto:[email protected]]
  Sent: Thursday, September 11, 2003 12:45 AM
  To: Subject: Canadian moved oout of copndo and moved to the US - Now wants to sell it. Ask an expert experts advsor advisors consultant consultants
    ----- Original Message ----- 
    From: David Ingram 
    -----Original Message-----
    From:Sent: Monday, September 08, 2003 8:53 AM
    To: [email protected]
    Subject: Selling Canadian condo while living in US
    Hi David. First off, I very much appreciate the valuable information you provide in this forum.
    My wife and I (both Canadian) bought a condo in BC back in May 1995, and only lived in it for a year before moving south of the border in May 1996.
    We did not sell the unit, but rather turned it into a rental unit, and have had renters in it ever since. We have been filing NR6 returns and filing our section 216 return faithfully every year. To date, we have always paid our estimated tax with the NR6, and then claimed enough CCA to get the tax back to $0 so we get the money refunded after each section 216. We have been declaring the rental income and expenses on our US return, and with
    depreciation, have always ended up with a "net loss" which has offset our US income. Hopefully, nothing is unusual to this point.
    Now our renter has asked us if we are interested in selling the unit to her.The timing for us (from a personal perspective) is great, because we are wanting to sell our current residence (in the US) and move to a larger house (in the US), and the equity from our Canadian condo unit would help us with the down payment (even though the exchange rate is not so favorable). Also, we could reduce, or even eliminate, the need for real estate agents.
    However, I am unsure of the tax implications. I do not know if there is any advantage/disadvantage to disposing of the property while we are still in the US, and in fact, we expect to be in the US for several years to come, so we would probably have to hold it for a LONG time if we wanted to wait till we returned to Canada. Are there any other complications (besides tax-related issues) that we should be aware of?
    Some quick points that may or may not be relevant:
    -> We did not get a fair market appraisal done at the time we moved out of our condo unit, but did "estimate" the FMV when we did the taxes back in 1996.
    -> The property value took a huge hit right around the time we moved out (we bought into a bubble), and we estimate that the value of the unit is less than we paid for it back in 1995, and perhaps only marginally more than when we moved out in 1996.
    -> We had $4000 worth of costs in 2003 as part of a special levy, of which not a single penny went towards our unit. We only net about $2000/year on the rental (before CCA is taken into account), so we cannot even write off the full amount of the expenses (and there is no carry-forward according to
    CCRA). Can we offset this expense against any gains we might have (if we sell it this year)?
    I will gladly provide you with any other relevant information upon request. ANY feedback is greatly appreciated.
    Regards,
    DXXXXXXXXXXXXX
    =========================================
    david ingram replies:
    1.    Selling it now or when you come back to Canada does not matter.  Your decision should be made upon whether or not, you can use the funds to better use.
    2.    If you sell, you will have a capital gain or loss (as the case may be) between its FMV the DAY YOU MOVED OUT in 1996, and the day you sell it, even if you sell it for less than you actually paid for it in 1995.
    3.    If you have not paid the $4,000 levy, leave i for the purchaser and sell it for less. This is what is happening with leaky condos all over BC and Seattle.
    4.    If there is a profit, you will pay tax to Canada on 50% of the profit at your ordinary tax rates.  Therefore, only $1,000 of a $2,000 profit would be taxed.  Assuming the profit is less than $60,000 and the property is in BC, your tax on a $2,000 profit would be about $230.00
    5.    If you have been claiming Capital cost Allowance (depreciation) on the building and you sell it for at least as much as you started with, you will also have to pay tax on the amount of CCA you are recapturing back.  It sounds to me that you would owe about 23% tax on whatever amount of CCA (depreciation) you have claimed over the years.
    6.    Unfortunately, your operating loss is not deductible against other profits.  Of course, another solution would be to capitalize your $4,000 special assessment and add it to the ACB (adjusted cost base of the building).  HOwever, $4,000 added to thge ACB and $2,000 claimed as a actual deduction have exactly the same tax consequences.
    Hope this helps.  We are a licenced real estate company as well (although not heavily advertised) and have two lawyers in our building who are used to dealing with offshore sales and the relative withholding taxes, etc.  You will also want to dfile a T2062A BEFORE you transfer the property.
    Find the T2062A at: http://www.ccra-adrc.gc.ca/E/pbg/tf/t2062a/t2062a-01e.pdf
    I am not proposing that we act as realtors in the sale to your tenant.  However, you will need an opinion as to the value of the property the day you moved and you will need the tax returns prepared for this purpose.  We can look after all of that for you plus handle the lawyer's work at the same time.
    David Ingram of the CEN-TA REALTY  Group
    US / Canada / Mexico tax and working Visa Specialists
    US / Canada Real Estate Specialists
    108-100 Park Royal South
    West Vancouver, BC, CANADA, V7T 1A2
    (604) 980-0321 - Fax 913-9123 [email protected]
    www.centa.com www.david-ingram.com
    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 in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
    Be ALERT,  the world needs more "lerts"
     
     
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