Returning from France to move into a

QUESTION: We are non-residents (for 13 years) and we are considering the
sell of our Vancouver condo.  We realize the sale would be subject to 25%
withholding tax.  If we decided not to sell and moved back to Canada in the
future, what Capital gains would we have to pay?  We are trying to find out
what is the best way to dispose of our property.  There is no urgency to
sell - it is being rented out through a management agency. However if we
ever did plan to move back would we be better off to sell before we return
or to sell after we resume residency?
Thanks for you help
Kind regards
the Cassadys
=====================================
david ingram replies:
Interestingly, you are the third "France back to Vancouver" situation I have
had this week. And last Monday, I took delivery of a 1973 French Citroen SM
Scenario One:
If you sell your condo while a non-resident, there will be a 25% of the
profit withholding tax. There will also be a 25% withholding tax on the
amount of any CCA (depreciation) you have taken over the 13 years. For these
calculations, we cannot use Real Estate Commissions as an expense.
Then, next February, you have to file an actual tax return on which you get
to claim the Real Estate costs and that usually results in a refund.
------------
Scenario Two
You return and move in.
In this case, you have to calculate the Capital Gain from the deemed sale of
the property.  This amount goes on line 127 of the tax return.  THEN, if you
file an election to defer the tax under section 45(3) of the tax act, you
can deduct the amount on line 256.  Using this scene, you do not pay the tax
until you actually sell the unit.
At the same time, any depreciation or CCA you claimed becomes taxable as a
recapture on schedule T776 and goes on line 126.  You can NOT defer the tax
on the recaptured depreciation.
This recaptured depreciation is effectively added to the top of any other
income you have in the year in Canada.  Therefore, if you moved in on Dec
15th of a year, it would be the only taxable income you had that year in
Canada and the tax rate would likely be 23% or so.  If you came back 3 weeks
later and had another $100,000 of income, you would be adding the recapture
to $100,000 and likely pay 40% tax on the amount.
------------------------------------------------
If you are determined to sell before or just after returning, for Canadian
tax purposes, it would likely make more sense to sell before you return.
Of course, this is just what happens for Canada.  Under Article IV of the
Canada France Income Tax treaty, you have to be  reporting the rental income
in France to be exempt in Canada on your income from France.
Under Article 6, the rental income is clearly taxable in Canada first and
France second.  Under the terms of Article XIII(5) the sale in Canada is
clearly taxable in France if you have lived in France for ten years or more
OR the five years immediately preceding the sale.
I do not know French law well enough but believe that they will tax the
deemed profit on sale when you leave if the property has not been sold yet.
Of course, this is NOT double taxation.  France will allow a tax credit
against their tax for the taxes paid to Canada.
----------------------------------------------
David Ingram's US/Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
Home office at:
4466 Prospect Road
North Vancouver,  BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325
Calls welcomed from 10 AM to 10 PM 7 days a week (please do not fax or phone
outside of those hours as this is a home office)
email to taxman at centa.com <mailto:taxman at centa.com>
www.centa.com <http://www.centa.com/>  www.david-ingram.com
<http://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 for expert help, assistance, preparation, or
consultation  in connection with personal or business affairs such as at
www.centa.com <http://www.centa.com> . If you forward this message, this
disclaimer must be included."
Be ALERT,  the world needs more "lerts"
David Ingram specializes in giving expert income tax and immigration help to
American and Canadian citizens living out of their home countries from
Zimbabwe to Saudi Arabia to Mexico to China or Chile - Cross border,
Non-resident - dual citizen - out of country investments are all handled
with competence and authority.
This from "ask an income tax and immigration expert" from www.centa.com
<http://www.centa.com/>  or www.jurock.com <http://www.jurock.com/>  or
www.featureweb.com <http://www.featureweb.com/> . David Ingram deals on a
daily basis with expatriate tax returns with:
multi jurisdictional cross and trans border expatriate problems  for the
United States, Canada, Mexico, Great Britain, United Kingdom, Kuwait, Dubai,
Saudi Arabia, Thailand, Indonesia, Japan, China, New Zealand, France,
Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia,
Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran,
India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba,
Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK,
GB, and any of the 43 states with state tax returns, etc. Rockwall, Dallas,
San Antonio Houston
Denmark, Finland, Sweden Norway Bulgaria Croatia Income Tax and Immigration
Tips, Income Tax  Immigration Wizard Antarctica Rwanda Guru  Consultant
Specialist Section 216(4) 216(1) NR6 NR-6 NR 6 Non-Resident Real Estate tax
specialist expert preparer expatriate anti money laundering money seasoning
FINTRAC E677 E667 105 106 TDF-90 Reporting $10,000 cross border transactions
Grand Cayman Aruba Zimbabwe South Africa Namibia help USA US
 David Ingram expert income tax help and preparation of US Canada Mexico
non-resident and cross border returns with rental dividend wages
self-employed and royalty foreign tax credits
Alaska,  Alabama,  Arkansas,  Arizona,
California,  Colorado, Connecticut,
Delaware, District of Columbia,  Florida,
Garland, Georgia,  Hawaii,  Idaho,  Illinois,
Indiana,  Iowa,  Kansas,  Kentucky,
Louisiana,  Maine,  Maryland,
Massachusetts, Michigan, Minnesota,
Mississippi,  Missouri,  Montana,  Nebraska,
Nevada, New Hampshire,  New Jersey,
New Mexico, New York, North Carolina,
North Dakota,  Ohio,  Oklahoma,  Oregon.
Pennsylvania,  Rhode Island,  Rockwall,
South Carolina, South Dakota, Tennessee,
Texas,  Utah, Vermont,  Virginia,
West Virginia, Wisconsin, Wyoming,
British Columbia, Alberta, Saskatchewan,
Manitoba, Ontario, Quebec City,
New Brunswick, Prince Edward Island,
Nova Scotia, Newfoundland, Yukon and
Northwest and Nunavit Territories,
Mount Vernon, Eumenclaw, Coos Bay
and Dallas Houston Rockwall Garland
Texas  Taxman and Tax Guru  and wizzard
wizard - consultant - expert - advisor -advisors consultants - gurus - Paris
Prague Moscow Berlin
Lima Rio de Janeiro, Santaigo Zimbabwe
New York, Boston, Sacramento, Minneapolis, Salem, Wheeling, Philadelphia,
Pittsburgh, Atlanta, Pensacola, Miami, St Petersburg, Naples, Fort Myers,
Cape Coral, Orlando, Atlanta, Arlington, Washington, Hudson, Green Bay,
Minot, Portland, Seattle, St John, St John's, Fredericton, Quebec, Moncton,
Truro, Atlanta, Charleston, San Francisco, Los Angeles, San Diego,
Sacramento, Taos, Grand Canyon, Reno, Las Vegas, Phoenix, Sun City, Tulsa,
Monteray, Carmel, Morgantown, Bemidji, Sandpointe, Pocatello, Bellingham,
Custer, Grand Forks, Lead, Rapid City, Mitchell, Kansas City, Lawrence,
Houston, Albany, Framingham, Cambridge, London, Paris, Prince George, Prince
Rupert, Whitehorse, Anchorage, Fairbanks, Frankfurt, The Hague, Lisbon,
Madrid, Atlanta, Myrtle Beach, Key West, Cape Coral, Fort Meyers,   Berlin,
Hamburg
Warsaw, Auckland, Wellington, Honolulu, Maui, Kuwait, Molokai, Beijing,
Shanghai, Tokyo, Manilla, Kent, Winnipeg, Saskatoon, Regina, Red Deer, Olds,
Medicine Hat, Lethbridge, Moose Jaw, Brandon, Portage La Prairie, Davidson,
Craik, Edmonton, Calgary, Victoria, Vancouver, Burnaby, Surrey, Edinburgh,
Dublin, Belfast, Glasgow, Copenhagen, Oslo, Munich, Sydney, Nanaimo,
Brisbane, Melbourne, Darwin, Perth, Athens, Rome, Berne, Zurich, Kyoto,
Nanking, Rio De Janeiro, Brasilia, Colombo, Buenos Aries, Squamish,
Churchill, Lima, Santiago, Abbotsford, Cologne, Yorkshire, Hope, Penticton,
Kelowna, Vernon, Fort MacLeod, Deer Lodge, Springfield, St Louis, Centralia,
Bradford, Stratford on Avon, Niagara Falls, Atlin, Fort Nelson, Fort St
James, Red Deer, Drumheller, Fortune, Red Bank, Marystown, Cape Spears,
Truro, Charlottetown, Summerside, Niagara Falls, Albany Zimbabwe
--

Trackback

Trackback URL for this entry: http://www.centa.com/trackback.php/UsCaWeekofMon20060227002465.html

No trackback comments for this entry.

0 comments