Sent: Thursday, September 07, 2006 3:36 PM
Subject: Re: Property in U.S. need some help
Hello Mr Ingram;
Wondering if you can help me in my situation…direct me in what’s best to do next.
I’m a Canadian citizen living and working back home in Canada . I have property in my hometown, one house co-owned with an associate and the house that I currently live in with my family (mortgage on both).
I also own a house in the U.S. ( Texas ) that I acquired, at no cost to me, through a relationship break-up, when I was working there. Currently, this property is being rented and cared for by a vacation rental/property management company and, so far, has cost me very little. It “takes care of itself”and the mortgage is always paid.
My intent is to sell it after February 2008. I’d like to sell it and buy another rental property closer to home because of the hassle in dealing with a property such a distance away. If I can get a better rate on my mortgage I may keep it.
How will all of this affect my taxes? I don't know enough about capital gains or very much else concerning taxes involving both countries. This is cross-border and I’m very confused as to “all the rules , tax laws, etc.” of this situation. There is A LOT about this situation that I do not know. Help!!
Thanks for your time,
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david ingram replies:
Have covered just about all of Newfoundland a couple of times from the Bay of Bulls to Fortune to L'Anse aux Meadowes and Labrador. Never went to XXXXXX however.
If you sell the house in Texas, you will have US capital gains tax to pay if it has gone up in value.
The house also has to be valued as of the date you returned to Canada for the purposes of Canadian capital gains tax. Remember to take the different exchange rates into account.
You have to file a US Schedule E with a 1040NR each year to report the US rental income (failure to file is a $1,000 to $10,000 penalty plus 30% of the gross rent).
The US rent must also be reported on a T776 on your Canadian T1. If you paid any tax to the US, you would get a foreign tax credit in Canada by filling in lines 431 and 433 and doing the foreign tax credit on schedule 1 of your T1.
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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 consu
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