My_question_is: Applicable to both US and Canada
Subject: Gifts
Expert: taxman at centa.com
Date: Saturday December 11, 2004
Time: 06:09 PM -0800
QUESTION:
My Parents, both resident canadians, are considering gifting me a hierloom
property (located in Canada).
1.) Are they subject to US taxation?
2.) Am I subject to any tax..
3.) If I sell, am I subject to tax on the entire amount or proceeds, or just
the gain while in my possession?
----------------------------------
david ingram replies:
Assuming that your parents are not US citizens, there would be no US gift
tax and you would not owe any tax at the point of the gift either.
When you sell, the difference between its worth when it was given to you and
the sale price will be taxable to you in both Canada and the USA. If the
property is rented out, you will need to file Canadian forms NR-6 and a
Section 216(4) + T776 Canadian income tax return on an annual basis. You
will then convert the numbers to US dollars and report the income again on
US schedule E.
If you have paid rental tax to Canada, you will claim the tax on US form
1116.
=======
Your parents WILL have to pay tax on any increase the Canadian heritage
property has increased in Value since their acquisition unless it is their
personal residence and qualifies for tax free status under a principle
residence designation which you can check out on Canadian form T2091.
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