sale of rental house -
QUESTION:
Hi there, I am thinking of selling a rental property (in BC) and wish to be more educated on tax implications. The property was bought in 1989 as a principal residence and remained a principal residence until 1995. In 1995 I went to university and I rented out the house-I never moved back and rented it until now. In the mean time I bought another house in 2002 and used it as my primary residence until 2005 and sold it (paid no tax). I have been renting since then. How can I minimize the tax payable for the sale of my rental house? (bought for 80k sell for 250k+-)
--------------------------------------------------------------------------------Hi there, I am thinking of selling a rental property (in BC) and wish to be more educated on tax implications. The property was bought in 1989 as a principal residence and remained a principal residence until 1995. In 1995 I went to university and I rented out the house-I never moved back and rented it until now. In the mean time I bought another house in 2002 and used it as my primary residence until 2005 and sold it (paid no tax). I have been renting since then. How can I minimize the tax payable for the sale of my rental house? (bought for 80k sell for 250k+-)
david ingram replies:
When you rented the house out in 1995, you should have filed the following declaration with the rental statement:
"I hereby elect to treat the property at 111 Any Street
Any Town, BC
as my principal residence even though I do not ordinarily live in it."
Although you should have filed this with the tax return,I HAVE NEVER SEEN (TO THIS POINT ANYWAY) THE CRA TURN DOWN A LATE FILED ELECTION if you did not depreciate or claim CCA (capital cost allowance) on teh building. If you claimed CCA, you will owe capital gains tax on the increase in value from 1995 to today. If you did not depreciatre or claim CCA, yo get an extra 5 years.
In either case, you have to fill in CRA form T2091 to calculate the taxable amount.
Find the form at http://www.cra-arc.gc.ca/E/pbg/tf/t2091_ind/t2091-ind-04e.pdf
Find the worksheet for the form at http://www.cra-arc.gc.ca/E/pbg/tf/t2091_ind_-ws/t2091-ind-ws-05e.pdf
David Ingram wrote:
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Calls welcomed from 10 AM to 9 PM 7 days a week Vancouver (LA) time - (please do not fax or phone outside of those hours as this is a home office)
$1,600 would be for two people with income from two countries
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David Ingram gives expert income
tax & immigration help to non-resident Americans & Canadians from
New York to California to Mexico family,
estate, income trust trusts Cross border, dual citizen - out of
country investments are all handled with competence &
authority.
Phone consultations are $400 for 15
minutes to 50 minutes (professional hour). Please note that GST is added if
product remains in Canada or is to be returned to Canada or a phone consultation
is in Canada.
This is not intended to be definitive but in
general I am quoting $800 to $2,800 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
$1,600 would be for two people with income from two countries
$2,800 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 two or three slips and no capital
gains, etc. for $150.00 up.
With a Rental for $350
A Business for $350 - Rental and business likely
$450
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 $800 and up.
TDF 90-22.1 forms are $50 for the first and $25.00
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.
This from "ask an income trusts tax and immigration expert"
from www.centa.com or www.jurock.com or www.featureweb.com. David Ingram deals on a daily
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