Canadian and American sisters want to sell mom's Canadian house
My question is: Applicable to both US and Canada
QUESTION: My sister and I are joint owners of the family home since my
mother died. My sister lives in the US, but retains her Canadian citizenship.
Since she is now retired, we will be selling the home, and I have a number
of questions -
1. Need I use a realtor? What legal responsibilities will I have to look
after if I handle the sale myself.
2. Is there anything she (or I) can do to minimize any taxes to her?
3. I took the capital gains partial exemption when I filled out my income
tax in 96-97. How will that work upon sale?
david ingram replies:
Assuming that the house was rented and is subject to Capital Gains tax, the
replies would be as follows:
1. You do not need to use a realtor. There are many books on the market
which you can get hold of to help you sell your house. However, a realtor
will usually pay their way by ensuring that you get top dollar for the
property. Of course, the buyer's realtor is telling the buyer that they are
getting the lowest price for the house.
The rules are different in different provinces as to the property disclosure
rules.
In BC you have to give the buyer a full property disclosure statement which
will detail everything that you know to be wrong with the house. If you
don't disclose a problem, the buyer can come after you for repairs.
2. As a non-resident, your sister did not get the chance to capitalize any
profit when your 1994 return was filed (or amended) and you filed the T664.
Your sister should have been reporting the rental income by filing a
Canadian return under Section 216(4) each year and then she should also have
been filing a Schedule E to report the rental income on her US return. If
she paid any tax to Canada, she would have or should have claimed it as a
credit by filing US form 1116.
3. When you filed the T664 in 1995 for your 1994 return, the amount of
elected gain found at Step 3, line 6 was recorded or should have been
recorded in the CRA's computer and be available for you to claim now.
When you sell the home, you will add this amount to your inherited cost and
pay tax on the difference between the grossed up figure and the sale price
(your half). Your sister will pay tax to Canada (and the US) on the
difference between the value at your mother's death and the sale price.
QUESTION: My sister and I are joint owners of the family home since my
mother died. My sister lives in the US, but retains her Canadian citizenship.
Since she is now retired, we will be selling the home, and I have a number
of questions -
1. Need I use a realtor? What legal responsibilities will I have to look
after if I handle the sale myself.
2. Is there anything she (or I) can do to minimize any taxes to her?
3. I took the capital gains partial exemption when I filled out my income
tax in 96-97. How will that work upon sale?
david ingram replies:
Assuming that the house was rented and is subject to Capital Gains tax, the
replies would be as follows:
1. You do not need to use a realtor. There are many books on the market
which you can get hold of to help you sell your house. However, a realtor
will usually pay their way by ensuring that you get top dollar for the
property. Of course, the buyer's realtor is telling the buyer that they are
getting the lowest price for the house.
The rules are different in different provinces as to the property disclosure
rules.
In BC you have to give the buyer a full property disclosure statement which
will detail everything that you know to be wrong with the house. If you
don't disclose a problem, the buyer can come after you for repairs.
2. As a non-resident, your sister did not get the chance to capitalize any
profit when your 1994 return was filed (or amended) and you filed the T664.
Your sister should have been reporting the rental income by filing a
Canadian return under Section 216(4) each year and then she should also have
been filing a Schedule E to report the rental income on her US return. If
she paid any tax to Canada, she would have or should have claimed it as a
credit by filing US form 1116.
3. When you filed the T664 in 1995 for your 1994 return, the amount of
elected gain found at Step 3, line 6 was recorded or should have been
recorded in the CRA's computer and be available for you to claim now.
When you sell the home, you will add this amount to your inherited cost and
pay tax on the difference between the grossed up figure and the sale price
(your half). Your sister will pay tax to Canada (and the US) on the
difference between the value at your mother's death and the sale price.
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