QUESTION:
Hello, my wife and I are moving to the US to work. Would it be financially
more beneficial to sell our house in Canada, or should we consider keeping
it? If we keep it and rent it out, do we then have to pay income tax in
both countries? The value of the house is $120,000. Thanks in advance
-------------------------------------------
david ingram replies:
NO ONE KNOWS:
It is a combination of real estate values, exchange rates, rents, what you
have to pay where you go to live.
For instance, I had a fellow in who withdrew $190,000 from an IRA in 2001
and forgot / neglected to report it on his US tax return. He bought a
Canadian house for $400,000 Canadian with the $190,000 which was worth
$294,000 Canadian at the time.
Today the house is worth $800,000 Canadian which is $660,000 US.
His late tax, penalties and interest to the IRS is $126,000 US which today
is only $135,000 Canadian.
Now, a lot of, if not most financial advisors would have told him NOT to
take out the $190,000 because at 42, he was subject to a 10% penalty and
income tax. I disagree. He has increased his net worth in real dollars by
some $400,000 US and tax is paid on most of it.
In general, I would suggest that you keep the house in Canada and rent it
out.
However, if selling it, gave you the cash to buy a special house in the US
because you intend to remain there for a long time, you would be better off
buying a great house in the US then you are having a rental in Canada and a
lesser house in the US.
If you intend to return to Canada in the future, KEEP THE HOUSE.
It is the only way you can guarantee you will have a home you can afford in
the future in the place you want to live.
If you are leaving Canada as taxable residents, you must file forms T1161,
1243 and 1244 if you fit into the rules. Keeping the house would mean that
you have to file a T1161.
--------------------------
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