QUESTION:
Hello,
I am considering the possibility of moving this year to canada to a house I
am buying currently (for a vacation house now, but who knows?). It is one
scenario.
If I sell my US house (let us say) on July 1, and settle into the Canada
house (let us say) on July 2 AS MY ONLY RESIDENCE, which jurisdiction taxes
the proceeds on the sale of the house, when it comes time to file income tax
returns for the tax year 2004, Canada or the US? The tax differences are
huge, needless to say.
Thanks.
============================================================
david ingram replies:
As a US citizen, you are taxable on your world income no matter where you
live. Therefore, the US taxes your US house and you have up to $250,000
(US$$) per person tax free provided you used the house as your personal
residence for 2 out of the last three years.
Canada values the house as you come across the border. So, assuming you are
selling a San Francisco Bay Area house in the $600,000 range and it was
worth $550,000 when you entered Canada, and you bought it for $200,000, you
would owe tax to the US on $150,000 ($600,000 - cost of $200,000 - $250,000
tax free) and you would pay Canada tax on $50,000 ($600,000 - $550,000 as
you crossed the border). Canada would give you a foreign tax credit for
some of the tax paid to the US on that $50,000 so there would not be a
massively big difference.
Hope this helps. Drop in next time you are in the neighbourhood. If the
house is in the greater Vancouver Area, David Stoller at (604) 922-4702 or
Bill Spohn at (604) 926-8681 are two lawyers in our building who are used to
dealing with our in and out of the country people.
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