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Reply_To:
My_question_is: Applicable to both US and Canada
Subject: Tax Implications of Lot Sale
Expert: [email protected]
Date: Sunday July 04, 2004
Time: 10:39 AM -0700
QUESTION:
We live in the United States but are Canadian citizens and will retire =
on Vancouver Island.
We purchased a lot last year with the intention of building within the =
next three years. The builder may have a better lot available in which =
case, we would have to dispose of the current lot and buy the new one. =
The builder and his lawyer handle the transaction so no real estate =
agent is involved.
What are the tax implications when we flip the original lot which has =
appreciated in value significantly? We have frozen all assets in Canada =
at this time so my concern is that the generation of capital gains will =
complicate US tax filing.
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david ingram replies:
1. Your first tax liability is to Canada as 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
Filing form T2062 allows you to calculate the profit after deducting =
legal and other costs of the purchase and any improvements to the =
property such as a fence, septic field and tank, culvert fence, electric =
hookup, etc.
The CRA will approve the T2062 and give the purchaser (which is likley =
the original developer in this case, to remit 25% of the profit rather =
than the gross sale price.
In April 2005, you will file the T1 return and pay a little more or get =
a small refund back.
2. Then you (or us if you want us to look after it all) will convert =
the Canadian figurtes to US dollars and put the amounts on schedule D of =
your US return. Since you have made a profit, there will have been tax =
paid to Canada and you will claim a foreign tax credit on your US return =
by filling in US Form 1116.
And yes, we can look after the Canadian, Provincial, US Federal and =
State returns for you by email, snail mail, fax or courier.
. =
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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 Cartier =
Partners and I will be hosting 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:
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for the United States, Canada, Mexico, Great Britain, the United =
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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
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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."
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 form province to province =
as well.
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