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QUESTION:
I am a US citizen and have owned a small=20
house and property in Canada for about=20
12 years. If sold now I would realize a=20
capital gain of about 60,000 Cdn. Am I=20
obligated to pay a capital gains tax to both=20
the USA and Canadian government and=20
what would the approximate amount of=20
that be? If I must pay both governments=20
how does the tax credit work if there is=20
one? Thank you kindly.
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david ingram replies:
Your first tax liability is to Canada if the property is in Canada. You =
will calculate and pay tax to Canada on a T1 return with Schedule 3 =
filed to report the Capital gain. The purchaser will withhold 25% of the =
GROSS sales price unless you get a Form T2062 approved for reduced =
withholding.
http://www.ccra-adrc.gc.ca/E/pbg/tf/t2062/t2062-01e.pdf
If the property was a rented property, you also need to file a T2062A =
with the T2062.
http://www.ccra-adrc.gc.ca/E/pbg/tf/t2062a/t2062a-01e.pdf
If the property was rented, you should have been filing Canadian returns =
under Section 216(4) Form T1 plus T776) to report the rental income to =
Canada and Schedule E to report the income to the US on your 1040 EVEN =
IF IT WAS LOSING MONEY.
After paying the tax to Canada, you will calculate the gain again for US =
purposes and if there is a calculated tax (schedule D), you will claim a =
foreign tax credit for the tax paid to Canada on US form 1116.
Please note, that if they were rented, You will also have to repay the =
tax on any CCA (Capital Cost Allowance or depreciation) you have claimed =
against the rental income in Canada and would file a 4797 in the US to =
deal with the capital gain of sale of a business property.=20
Depending upon the profit, you can expect to pay a Canadian Tax of 11 to =
23% of the profit with 11% up to $60,000 of profit, three more rates up =
to $200,000 and 23% on any profit over $200,000 Canadian in one =
person's name. The rate has minor variations from province to province =
as well.
If you do not send in the T2062 and T2062A forms (which are suddenly =
taking longer to process for some reason or other), the purchaser must =
withhold 25% of the gross sale price. You will get a refund then when =
you file the tax returns.
And watch out about the rentals. We just filed a T2062 for a British =
client who clearly told me that the property was not rented. He did say =
they were selling it to friends who had stayed there many times but that =
it was not rented. The CRA phoned the purchaser to check on the sale and =
the "friends" told the CRA representative that they had been renting the =
house for several years. "TILT". The CRA is now demanding back several =
years of rental returns and does not need to allow any rental expenses =
for taxes or mortgage interest and repairs for more than two years back. =
In Canada, the penalty for not reporting rental income to Canada is a =
minimum of 25% to a maximum of 44% of the gross rent with no expenses =
allowed. (In the USA, the reverse penalty for a Canadian with a rented =
Condo is 30% of the gross rent with no expenses allowed). And, I find =
it embarrassing to have filed an improper form. It takes away from my =
credibility with the tax department.
When filling in the T2062, real estate commissions may not be used in =
the calculation but can be when the actual return is filed so there is =
always an incentive to file the return.
And yes, we can look after the Canadian, Provincial, US Federal and =
state and city returns for you.
=
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Answers to this and other similar questions can be obtained free on Air =
every Sunday morning.
Every Sunday at 9:00 AM on 600AM in Vancouver, Fred Snyder of Dundee =
Wealth Management at 1764 West 7th in Vancouver - 604) 731-8900 and I =
host an INFOMERCIAL but LIVE talk show called "ITS YOUR MONEY"
Those outside of the Lower Mainland will be able to listen on the =
internet at
www.600AM.com=20
Local phone calls to (604) 280-0600 - Long distance calls to =
1-866-778-0600.=20
Old shows are archived at the site.
This from ask an income tax immigration planning and bankruptcy expert =
consultant guru or preparer from www.centa.com or www.jurock.com or =
www.featureweb.com. Canadian David Ingram deals daily with tax returns =
dealing with expatriate:
multi jurisdictional cross and trans border expatriate gambling refunds =
for the United States, Canada, Mexico, Great Britain, the United =
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Indonesia, Egypt, Antarctica, Japan, China, New Zealand, France, =
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Iran, India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, =
Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, =
US, UK, GB, American and Canadian and Mexican and any of the 43 states =
with state tax returns, etc.
income tax wizard wizzard guru advisor advisors experts specialist =
specialists consultants taxmen taxman tax woman planner planning =
preparer of Alaska, Alabama, Arkansas, Arizona,=20
California Denver Colorado, Connecticut, =20
Delaware District of Columbia Miami Florida,=20
Garland Georgia, Honolulu Hawaii, Idaho, Illinois,
Indiana Des Moines Iowa Kansas Kentucky,=20
Louisiana Bangor Maine Maryland =20
Boston, Massachusetts, Michigan, Minnesota, =20
Mississippi, Missouri, Montana, Nebraska, =20
Nevada, New Hampshire, New Jersey,=20
New Mexico,New York, North Carolina, =20
North Dakota, Ohio, Oklahoma, Oregon.=20
Paris, Rome, Sydney, Australia Hilton
Pennsylvania, Rhode Island, Rockwall,=20
South Carolina, South Dakota, Tennessee, =20
Texas, Utah, Vermont, Virginia,=20
West Virginia, Wisconsin, Wyoming,=20
British Columbia, Alberta, Saskatchewan,=20
Manitoba, Ontario, Quebec City,=20
New Brunswick, Prince Edward Island,=20
Nova Scotia, Newfoundland, Yukon and=20
Northwest and Nunavit Territories, =20
Mount Vernon, Eumenclaw, Coos Bay=20
and Dallas Houston Rockwall Garland=20
Texas Taxman and Tax Guru and wizzard=20
wizard - David Ingram's US/Canada Services
US/Canada/Mexico Tax Immigration & working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Calls accepted from 10 AM to 10 PM 7 days a week
Res (604) 980-3578 Cell (604) 657-8451
Bus (604) 980-0321=20
[email protected]
www.centa.com www.david-ingram.com
Disclaimer: This question has been answered without detailed =
information or consultation and is to be regarded only as general =
comment. Nothing in this message is or should be construed as advice =
in any particular circumstances. No contract exists between the reader & =
the author and any and all non-contractual duties are expressly denied. =
All readers should obtain formal advice from a competent financial, or =
real estate planner or advisor & appropriately qualified legal =
practitioner, tax or immigration specialist in connection with personal =
or business affairs such as at www.centa.com. If you forward this =
message, this disclaimer must be included
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