principal residency-45(2) election for as tax free when leaving - splitting income in community property state like Washington -

QUESTION:

I started working in the US in June 2007 with a TN Visa and the company just applied for H1 Visa. I am trying to sell my house since May 2007 (I lived in with my family for 7 years). Can I rent it out for a period of years before I will decide to try to sell it again, without accumulating capital gain? 
How many years someone have to own/live in a house for it to be considered "primary residence"? Thank you respectuous.

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david ingram replies:

When you leave the country as a non-resident, section 45(2) does not apply.  Any increase in value from the day you left until you sell is subject to Canadian AND US capital gains tax.

However, if you have left your wife and children behind in the house and return every weekend and elect to pay Canada tax on your US earnings and it remains your personal residence, it is not taxable in either country unless your share of the profit after going to the US exceeds $250,000

In the meantime, if you have left the country and rented the house out,

1.   you needed a Canadian Tax agent to have signed a form NR6 as your agent for 2007 and now for 2008.

2.   Your Canadian Agent had to file forms NR4 for you by March 31

3.   You have to file your departing Canada return by April 30, 2008.  that return MUST include form T1161 ---  The minimum fine for not filing your T1161 on time is $100 and the maximum is $2,500 after 100 days at $25.00 a day.

4.   depending upon what is on the T1161, you might have to file forms T1243 and T1244.

5.   You must file A T1159 with form T776 by June 30th to report the rental income if it is rented.

6.   Your US DUAL STATUS return must be filed by April 15th (or Oct 15th if form 4868 filed).This return must include the Canadian rental on Schedule E and 4562 - If you paid rental tax to Canada, you  claim credit on US form 1116.   Your State tax return is also due although it might be April 20th as in Hawaii or you might file a state extension as well.  Your US 1040 must also include forms TDF 90-22.1 and 8891 if you have left behind an RRSP.  See questions 7 and 8 at the bottom of schedule B.

If the house is in both names, you will both have to file a 1040 Dual Status.  Your wife's might only include the rental income but if you were in Washington state or California which are community property states, you can split the income from you salary as well and cut the tax significantly.
 
7.   Your 1040NR Dual Status Statement should be filed by April 15th or Oct 15th if .you filed an extension. 

Well, you must be getting the idea by now.  This older question should help.

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david ingram replies:

If you have moved to the USA and not left a husband and three kids behind that you visit every weekend, you are only taxable in the USA.

You must file a departing Canada return and show the date that you left Canada on the front of the return.  You then prorate your exemption amounts on schedule 1 and schedule 428 based upon the number of days you were in Canada. 

If you left any assets of value behind like a summer cabin or mutual funds, you have to be prepared to fill in forms 1161, 1243 AND 1244.  FILING A LATE 1161 INCURS A PENALTY OF $25.00 A DAY TO A MAXIMUM OF $2,500.

THESE OLDER QUESTIONS WILL HELP AS WELL.  If you need help, you know where we are.
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Hello,

Thank you in advance for your help

My situation is:

I am in USA under TN-Visa. I worked 255 days in USA in 2006 and I already filled
the 1040 and 1040NR as dual-status, based on the number of days in USA.

My question is:

Should I declare what I earned in USA to Canada revenue?
How can I avoid double taxation?
Do you do Canadian taxes?
Can I know the fees?

Regards

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david ingram replies;

Too busy in this last two weeks.

This might help

QUESTION: Hi David,

I am Canadian citizen, worked in Canada for the first 5 months of 2006. then moved to US and worked then for the rest of 2006. I have income from Canada employer, Canadian bank and US employer. I filed tax return on my US income to IRS already. I haven't done Canadian tax return yet. I had thought I only need to file Canadian tax return on my Canadian income. But it seems both CRA and IRS requested to report my world income to both. I am confused. What should I do to file the tax return to both? 

More specially, I received NR4 slip from CIBC bank. I could not find where to enter this form when I used Ufile.ca. 
How can I enter US W2 form into any Canadian tax form?
How can I enter T4 slip into US tax return form? 

thanks a lot!

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david ingram replies:

An NR4 does not go on the Canadian return.  It goes on Schedules B and 1116 of the US return

The T4 does not go on the US return unless you are filing as a year round resident as in 2 below.

I am too busy to come up with a new answer but this older one will give you an idea.

QUESTION: Hi David,

I really need your help in filling U.S tax and I am getting mixed messages which forms to file. 

I am a Canadian Citizen in U.S on TN visa for more than a year. 

I have RRSP in Canada over 10,000 put in fixed bond and saving account in a bank. 

What do I need to file here and what forms do I need to fill. 

Do I still have to file tax in Canada for Canadian earning? Please help.

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david ingram replies;

You need to file a departing Canada tax return and file T1161 if you left more things than your RRSP behind.  The Canadian return will only include Canadian earnings although if you had a Home Buyers Plan, it is all due and taxable on the departing Canada return unless you have paid it back.

For the US, you have two choices:

1.   File a 1040NR dual status statement and a Dual Status 1040 Income Tax return with no standard deduction

or

2.   File a full 1040 which includes your Canadian income and gives you a full standard deduction and the right to file a joint return if married.  This is usually the best if you left Canada early in the year as you did.

If you can't figure it out, file an extension  form 4868 (find it at http://www.irs.gov/pub/irs-pdf/f4868.pdf )

and then send the information to us at the address in blue below to complete for you.
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