Subject: Transfer of Principal Residence
Expert: taxman at centa.com
Date: Wednesday September 27, 2006
Time: 06:07 PM -0400
QUESTION:
I was a Canadian tax resident in 2005. During this year my father
transferred his principal residence to me and my spouse. I assumed the
remaining mortgage on the property at the time of transfer and maintained it
as my principal residence until March 2006, when I moved to the U.S.
As of March 2006 I live and work in the U.S. and will be a U.S. resident for
tax purposes, as I have no ties to Canada other than the house I own.
Question:
I was wondering what would be my cost basis for the house transferred to me
by my father? Will it fair market value at the date of transfer?
If I sell the house this year how will the capital gain be calculated for
withholding tax purposes? Will the bank withold 20% of sales price or gain?
I will need to hire professional firm for doing my U.S. and Canadian tax
return for 2006 and I would like an approximate quote.
------------------------------------------------------
david ingram replies:
Your Adjusted Cost Base is the value of the property when it was given to
you.
The withholding tax on a sale is 25% of the sales price "unless" you file a
T2062 and T2062A within 10 days of the sale. The penalty for filing the
forms late is $25.00 a day and it is enforced.
You can find the forms at http://www.cra-arc.gc.ca/menu/AFAF_T_T2-e.html#ti
If you inherited the house at $400,000 and sell it for $500,000, the profit
would be $100,000.
Canada would tax you on $50,000 on schedule 3, The US would tax you on
$100,000 on schedule D.
That is assuming that you did not live in eh house as your principal
residence.
If you lived in the house from the day your father gave it to you and then
moved to the US because of a change of plans, the Canadian cost price would
be its value in March 2006, the day you left Canada.
For US purposes, the cost is still what you received it as. However, the US
will allow up to $250,000 per person tax free if you live in the house for
24 out of 60 months.
If you move out for a good and unplanned reason, you can prorate the
$250,000 over the months you did live in it.
I do not know what a specific price would be because I do not know what your
overall situation is.
In general, we quote $800 to $2,000 Canadian for US / Canadian Tax returns.
Filing the forms T2062 and T2062A is usually in the $750 range.
The year you enter one country and leave the other tends to be more.
The following price guidelines will likely help you.
-------------
Phone consultations are $400 for 15 minutes to 50 minutes (professional
hour).
This is not intended to be definitive but in general I am quoting $800 to
$2,000 for a dual country tax return.
$800 would be one T4 slip one W2 slip one or two interest slips and you
lived in one country only - no self employment or rentals or capital gains -
you did not move into or out of the country in this year.
$1,000 would be the same with one rental
$1,200 would be the same with one business no rental
$1,200 would be the minimum with a move in or out of the country. These are
complicated because of the back and forth foreign tax credits. - The IRS
says a foreign tax credit takes 1 hour and 53 minutes.
$1,500 would be the minimum with a rental or two in the country you do not
live in or a rental and a business and foreign tax credits no move in or
out
$2,000 would be all of the above and you moved in and out of the country.
This is just a guideline for US / Canadian returns
We will still prepare Canadian only (lives in Canada, no US connection
period) with a three or four slips and no capital gains, etc. for $125.00
up.
With a Rental for $300
A Business for $300 - Rental and business likely $400
And an American only (lives in the US with no Canadian income or filing
period) with about the same things in the same range with a little bit more
if there is a state return.
Moving in or out of the country or part year earnings in the US will ALWAYS
be $400 and up.
TDF 90-22.1 forms are $25 for the first and $10.00 each after that when part
of a tax return.
8891 forms are generally $50.00 to $100.00 each.
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
Capital gains *sales) are likely $50.00 for the first and $20.00 each after
that.
Just a guideline not etched in stone.
------------------------------------
David Ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
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North Vancouver, BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
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Calls welcomed from 10 AM to 10 PM 7 days a week Vancouver (LA) time -
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