If I were to sell my principal residence in Canada....can I take
the funds and buy property in somewhere like Morocco, Bahamas or Mexico without
their being any big tax implications. My plan would be to make that
my principal residence for a couple of years and then sell it so I
would like to find a country that didn't have capital gains for that type of
sale. Can you give me any guidance?
david ingram replies:Thanks
There are lots of places you can buy without a capital gains tax and some that have a capital gains tax but it does not apply to your principal residence.
For instance, until 2002, your house was tax free in Mexico if you had lived in it for the two years before sale. Now you have to get the Notario handling the transaction to agree that it was your residence or he or she will tax it because they are responsible for the tax if you do not pay it so they want to collect first. You will have to possess an FM-2 or FM-3 visa as well.
In the US, you have to have lived in the house for 24 months out of the last 60 for it to be tax free up to $250,000 profit each and you have to be a legitimate resident of the US. That implies that you have an L1, H1, TN, O1, P1 visa or a green (resident alien) card.
In Canada, it is tax free if it is your principal residence. You can have a summer cabin or winter ski chalet and a house in town and decide whioch one will be taxable and which one is tax free. Of course, you have to be legitimate resident as well.
There is no capital gains tax in the Bahamas, Costa Rica, Grand Caymans, Turcs and Caicos, Dubai, and another 100 countries, etc., etc.
I do not know about Morocco. However two of my clients who are Algerian citizens are very happy to be in Canada and this article (at http://www.commondreams.org/news2005/0930-04.htm)
would want me to avoid the place if it came to buying a home there. Both of these clients had come to Canada years ago and went back to Algeria to make money and left super high paying jobs because they were literally afraid for their lives.
And remember that going somewhere and buying a property for two years is not going to make you any money unless you just happen to pick 'the' next hot real estate market. You are staitstically more likely to lose money in two years than make money in my opinion.
By the way, one of the best places to buy is likely Ecuador. You could look up Gary Scott;'s Site at www.garyscott.com or read his specific article at http://www.garyascott.com/2007/01/08/1460.html.
Gary was in my office in the summer of 2000 and was pushing Ecuador then. It has done well since and International Living published another article praising Ecuador in the last couple of weeks.
However, I would not advise you to buy in Ecuador, Mexico, or any other place for a planned two year period.
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This is not intended to be definitive but in
general I am quoting $900 to $2,900 for a dual country tax
return.
$900 would be one T4 slip one W2 slip one or two
interest slips and you lived in one country only (but were filing both
countries) - no self employment or rentals or capital gains - you did not move
into or out of the country in this year.
$1,100 would be the same with one rental
$1,300 would be the same with one business no
rental
$1,300 would be the minimum with a move in or out
of the country. These are complicated because of the back and forth foreign tax
credits. - The IRS says a foreign tax credit takes 1 hour and 53
minutes.
$1,600 would be the minimum with a rental or two in
the country you do not live in or a rental and a business and foreign tax
credits no move in or out
$1,700 would be for two people with income from two countries
$2,900 would be all of the above and you moved in
and out of the country.
This is just a guideline for US / Canadian
returns
We will still prepare Canadian only (lives in
Canada, no US connection period) with two or three slips and no capital
gains, etc. for $175.00 up.
With a Rental for $375
A Business for $375 - Rental and business likely
$500
And an American only (lives in the US with no
Canadian income or filing period) with about the same things in the same range
with a little bit more if there is a state return.
Moving in or out of the country or part year
earnings in the US will ALWAYS be $800 and up.
TDF 90-22.1 forms are $50 for the first and $25.00
each after that when part of a tax return.
8891 forms are generally $50.00 to $100.00
each.
18 RRSPs would be $900.00 - (maybe amalgamate a
couple)
Capital gains *sales) are likely $50.00 for
the first and $20.00 each after that.
Catch - up returns for the US where we use the Canadian return as a guide will be $150 to $500.00 depending upon numbers of bank accounts, RRSP's, existence of rental houses, etc.
Just a guideline not etched in stone.
This from "ask an income trusts tax and immigration expert"
from www.centa.com or www.jurock.com or www.featureweb.com. David Ingram deals on a daily
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