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QUESTION:
Greek residents now, but both lived here and
bought unimproved lots 20 yrs.ago. How are
their gains calculated? What witholding tax
is due?
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david ingram replies:
When they sell it, there will be a 25% (of the gross sale) withholding tax to Canada unless they fill in a T2062 form first and get a ruling that their actual tax will be lower.
:If they fill in the T2062, the withholding will only be made on the amount of the expected profit.
Then they have to file Canadian returns to report that profit.
at that point they would have to pay tax on one half of the profit at rates running from about 24$ for the amount under $30,000 to 44% on amounts over $100,000 with three other rates in between.
So, as an example. If they paid $100,000 and are now selling for $300,000 and have a $200,000 profit and there are two of them, they would have $50,000 of taxable income each.
They would owe 25% of the first $30,000 or about $7,500 and about 33% of the next $20,000 or $6,600. In that case they would owe $7,500 plus $6,600 for a total of about $14,100 each.
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An exception would be if they lived here until February 1994. In that case, they could have topped up the values of the lots to take advantage of the pretend sale available to claim the up to $100,000 of capital gains tax free. I would have to see their 1994 tax returns to do any guesses in that case.
David Ingram's US/Canada Services
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
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