Cross border question former Canadian sells old home

Hi - the 1-800 number don't work in the US but I would love my
question answered on-air as I am listening on-line.
My husband and I are Canadian citizens, and have moved to the US.  We
rented out the Canadian family house for three years and paid tax on
the income, and just sold the house.  We lived in it for 2 years prior
to leaving the country.   We have paid a full 25% capital gains tax on
the amount the house has appreciated since we left the country.  The
US accountant now says we have to pay US capital gains on the amount
the house appreciated since we purchased it (even though we lived in
it for two years).  We fixed it up during that time and are looking at
$100,000 appreciation before we moved.  Is this accurate?  Thanks so
K (from California)
 david ingram replies:
There is a step up in the value of the house when you entered the US.
You should have paid about 23% of the profit in Canada and only pay
tax on the amount of the increased value of the house after you got
And, if you have not bought another house and did live in it for two
out of the last five years I would treat it as a tax free sale for up
to $250,000 each.
The step up in value now applies to almost everything but has always
applied to your old family house under the United State / Canada
Income tax Convention (1980) with amending protocols:
Article XIII(6) reads as follows:
6. Where an individual (other than a citizen of the United States) who
was a resident of Canada became a resident of the United States, in
determining his liability to United States taxation in respect of any
gain from the alienation of a principal residence in Canada owned by
him at the time he ceased to be a resident of Canada, the adjusted
basis of such property shall be no less than its fair market value at
that time.
If you continue to have a problem  (maybe one out of a thousand US
accountants will understand this), you are welcome to send the returns
to us.  You had25% withheld but unless you did not use a Realtor, you
have a refund coming back which will be at least 25% of the real
estate commission you paid.
Answers to this and other similar  questions can be obtained free on
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