US resident sells T2062 T2062A T1159 T776 1116 Non-res tax return
QUESTION: I have moved to the US since 2000 and current a green card holder. I still have a property in canada and currently listed as second home in the US tax return. I am planning to sell this property in the near future. Do I need to pay capitial gain tax in both US/Canada and how much?
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david ingram replies:
It sounds like the second home in Canada has being sitting empty.
When you sell it, the purchaser's lawyer is going to withhold 25% of the gross sale price as Canadian Withholding Tax - UNLESS - you file form T2062 within 10 days of the sale. .
T2062 - http://www.cra-arc.gc.ca/E/pbg/tf/t2062/t2062-07e.pdf
The purpose of the T2062 is that it will identify the value of the house the day you crossd the border and the purchaser will only have to withhold tax on 25% of the difference invalue between the day you left and the day you sold it.You can NOT claim real estate commissions and other costs of sale on this form which means when the return is actually filed there is always a refund..
THIS IS NOT THE TAX RETURN, it is merely a withholding tax form.
Tax RETURN
You will then have to file a tax return to report the sale next year. This return will tax you on 50% of the gain by using schedule 3 and 1. You can claim the real estate sales commissions, lawyers fees and other costs of sale at this point. File a T1 tax return with Schedule 3 and Schedule 1.
NON-RESIDENT T1 Return - http://www.cra-arc.gc.ca/E/pbg/tf/5013-r/5013-r-06e.pdf
Schedule 3 - Capital Gains - http://www.cra-arc.gc.ca/E/pbg/tf/5000-s3/5000-s3-06e.pdf
Non-Resident Schedule 1 - http://www.cra-arc.gc.ca/E/pbg/tf/5013-s1/5013-s1-06e.pdf
All these figures are then converted to US dollars and put on schedule D of the US return. taxes paid to Canda are claimed on US schedule 1116.
RENTAL
If the property was rented, you also have to file form T2062A and make sure that your T1159 and T776 forms were filed for each year the property was rented.
T2062A - http://www.cra-arc.gc.ca/E/pbg/tf/t2062a/t2062a-07e.pdf
T1159 - http://www.cra-arc.gc.ca/E/pbg/tf/t1159/t1159-06e.pdf
T776 - http://www.cra-arc.gc.ca/E/pbg/tf/t776/t776-fill-06e.pdf (fillable)
If rented, make sure the T776 rental figures were converted to US dollars and put on schedule E. Any taxes paid to Canada would go on the schedule 1116 you used for the capital gains tax paid.
Schedule E - http://www.irs.gov/pub/irs-pdf/f1040se.pdf
Schedule 1116 - http://www.irs.gov/pub/irs-pdf/f1116.pdf
Note that the T2062 and T2062A forms will likely be the same from year to year. However, the US and Canadian schedules shown above are all 2006 forms and you will need to get hold of the equivalent 2007 or 2008 forms when you actually make the sale.
And, of course, we can look after all of it for you when the time comes. That is what we do. �
-------------------------------------------------------
david ingram replies:
It sounds like the second home in Canada has being sitting empty.
When you sell it, the purchaser's lawyer is going to withhold 25% of the gross sale price as Canadian Withholding Tax - UNLESS - you file form T2062 within 10 days of the sale. .
T2062 - http://www.cra-arc.gc.ca/E/pbg/tf/t2062/t2062-07e.pdf
The purpose of the T2062 is that it will identify the value of the house the day you crossd the border and the purchaser will only have to withhold tax on 25% of the difference invalue between the day you left and the day you sold it.You can NOT claim real estate commissions and other costs of sale on this form which means when the return is actually filed there is always a refund..
THIS IS NOT THE TAX RETURN, it is merely a withholding tax form.
Tax RETURN
You will then have to file a tax return to report the sale next year. This return will tax you on 50% of the gain by using schedule 3 and 1. You can claim the real estate sales commissions, lawyers fees and other costs of sale at this point. File a T1 tax return with Schedule 3 and Schedule 1.
NON-RESIDENT T1 Return - http://www.cra-arc.gc.ca/E/pbg/tf/5013-r/5013-r-06e.pdf
Schedule 3 - Capital Gains - http://www.cra-arc.gc.ca/E/pbg/tf/5000-s3/5000-s3-06e.pdf
Non-Resident Schedule 1 - http://www.cra-arc.gc.ca/E/pbg/tf/5013-s1/5013-s1-06e.pdf
All these figures are then converted to US dollars and put on schedule D of the US return. taxes paid to Canda are claimed on US schedule 1116.
RENTAL
If the property was rented, you also have to file form T2062A and make sure that your T1159 and T776 forms were filed for each year the property was rented.
T2062A - http://www.cra-arc.gc.ca/E/pbg/tf/t2062a/t2062a-07e.pdf
T1159 - http://www.cra-arc.gc.ca/E/pbg/tf/t1159/t1159-06e.pdf
T776 - http://www.cra-arc.gc.ca/E/pbg/tf/t776/t776-fill-06e.pdf (fillable)
If rented, make sure the T776 rental figures were converted to US dollars and put on schedule E. Any taxes paid to Canada would go on the schedule 1116 you used for the capital gains tax paid.
Schedule E - http://www.irs.gov/pub/irs-pdf/f1040se.pdf
Schedule 1116 - http://www.irs.gov/pub/irs-pdf/f1116.pdf
Note that the T2062 and T2062A forms will likely be the same from year to year. However, the US and Canadian schedules shown above are all 2006 forms and you will need to get hold of the equivalent 2007 or 2008 forms when you actually make the sale.
And, of course, we can look after all of it for you when the time comes. That is what we do. �
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