My_question_is: Applicable to both US and Canada Subject: US Vacation home - capitlal gains Expert: taxman at centa.com Date: Thursday December 21, 2006 Time: 12:52 AM -0500 QUESTION: I bought property in Whatcom County in 1978. Over the years I’ve personally built and renovated a vacation home on the property. I’m now planning to sell the property. I have only few records of material costs and the labor of course was my own. As a Canadian resident my questions are: 1. At what level will I be subject to capital gains tax? 2. How can I limit the level of taxation? 3. Will I be subject to any taxation in Canada ------- --------------------------- david ingram replies: I am sick at home with pneumonia but this old answer should give you an idea of what to expect. You need a valuation for Jan 1 1982, Jan 1 1985 and hopefully you topped up your capital gains exemption in 1994. The sale is taxed first in the USA and second in Canada with Canada giving you credit for 50% of the tax paid to the USA. ---------------- QUESTION: I have sold my lot in Washington state. The land title company has held back 10 % for the IRS. How can I get this back and/or do I owe more to USA? Also, what are the ramifications on my Canadian personal income tax? Also do you know when I should convert to Canadian dollars. Your help would be greatly appreciated. Thanking you in advance. Regards ============================== david ingram replies: You will need to file a US 1040NR in early 2006 for the 2005. You are also subject to the alternative minimum tax form 6251. I have no idea whether you will get a refund or not. As an example, if you paid $20,000 in 1975 and just sold it for $300,000 and they withheld $30,000, you will owe more tax to the US. If you paid $250,000 and sold it for $300,000 and they withheld $30,000, you will be getting a refund. There is a further wrinkle in that if you owned it on Jan 1, 1985, there is a further calculation to make to take advantage of the US Canada Tax Treaty, Indeed, if it was a property you bought in 1964 as a summer cottage, you would have possible valuation days for Canadian tax purposes on Jan 1, 1972, Jan 1, 1982, and could have made the $100,000 election for Feb 22, 1994. For the US, there would have been no tax up to Jan 1, 1985 and then it would have been taxable thereafter and you have to have been in this business for 42 years (as I have) to really understand them all. The Canadian calculation has to be made using the exchange rates for the different years. When you are finished, if you owe tax in both countries, you pay the US first and then claim a foreign tax credit on lines 431 and 433 of your Canadian Income Tax return. Glad to look after it for you when the time comes. The above works for Texas, Alaska, Florida, Washington, Nevada, Tennessee, and New Hampshire. In 43 other states you have to file a state return as well and some like California and Vermont have a State Alternative Minimum Tax as well as the Federal. 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, I, david ingram am a permanent guest on Fred Snyder of Dundee Wealth Managers' 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 <http://www.600am.com/> Call (604) 280-0600 to have your question answered. BC listeners can also call 1-866-778-0600. Callers to the show and questioners on this board can also attend the Thursday Night seminars on finance and making your Canadian Mortgage Interest deductible. David Ingram's US/Canada Services US / Canada / Mexico tax, Immigration and working Visa Specialists US / Canada Real Estate Specialists Home office at: 4466 Prospect Road North Vancouver, BC, CANADA, V7N 3L7 Cell (604) 657-8451 - (604) 980-0321 Fax (604) 980-0325 Calls welcomed from 9 AM to 9 PM 7 days a week (please do not fax or phone outside of those hours as this is a home office) email to taxman at centa.com <mailto:taxman at centa.com> www.centa.com <http://www.centa.com/> www.david-ingram.com <http://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 and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist in connection with personal or business affairs such as at www.centa.com <http://www.centa.com> . If you forward this message, this disclaimer must be included." Be ALERT, the world needs more "lerts" This from "ask an income tax and immigration expert" from www.centa.com <http://www.centa.com/> or www.jurock.com <http://www.jurock.com/> or www.featureweb.com <http://www.featureweb.com/> . 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