My_question_is: Applicable to Another Jurisdiction or Multi-jurisdictions
Subject: UK Capital Gains tax on UK Property Sale
Expert: [email protected]
Date: Friday March 02, 2007
Time: 09:31 AM -0500

QUESTION:

Hi - I am a British citizen who has been resident in the US for 11 years, and a green card holder for 8 years. I have a property in the UK which I am considering selling. I have rented it out since I left, and have been paying tax in the US on the rental proceeds. I gather that I will have to pay capital gains tax in the US if I sell it. Will the UK Inland Revenue also expect me to pay capital gains tax on the sale? (It would seem a little unfair to have to pay twice!)
Thanks for your help.

___________________________________________
david ingram replies:

The property is taxable in the US and may be taxable in the UK first. If it is, the tax will be credited to you US tax by filing form 1116. This reply to a Canadian will give you a heads up.
--------------------------------------------



My_question_is: Canadian-specific
Subject: Tax on property sale in UK
Expert: [email protected]
Date: Wednesday January 24, 2007
Time: 10:25 AM -0500

QUESTION:

I hold both Canadian and British citizenship. I own property in the UK (I
have owned an apartment for about 15 years)and was wondering about the tax
situation, both in the UK and Canada, if I were to sell the property there.
-------------------------------
david ingram replies:

The UK is similar to Canada in terms of selling a principal residence.

I can also claim a British Passport but at 64 I am not likely to do so at
this time.

I know that if (always a non-resident) I had bought the house as an
investment, I would not owe any tax to the UK but would to Canada.

In the case of a house that you used to live in, it can be subject to UK
private residence tax relief if you lived in it before you left and can not
return because of job circumstances for either spouse.

If it is just an investment property, it is likely taxable. It does not
matter much though because the tax will be lower than the Canadian tax and
it "IS" taxable in Canada - the tax paid to the UK will be a tax credit in
Canada on lines 431 and 433 of the Canadian T1.

I suggest that you need to talk to a UK accountant or maybe the Inland
Revenue itself.

You can also find out a bit by reading


http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRental
Income/DG_4020890

Do me a favour and let me know the answer if you find out.

This will be going out to another 13,000 people and someone may write back
with the answer. If so i will forward it to you.

I am an American, my wife is a Canadian. We lived in
> Canada for 20 years, and have had your company catch
> us up on U.S. tax returns. Recently we sold our house
> in Canada and moved to the U.S. How does the capital
> gains on our house work? We did make a profit on it.
>
> ____________________________________________________________________________________
>
>
david ingram replies;

The house is tax free in Canada.

Up to $250,000 US profit is tax free for your share of the house sale.

Therefore if you sold the house for less than $500,000 US profit, there will be no tax in either country. If the house sold for a $700.000 US profit, your wiffe's share would be tax free but you would owe tax on $100,000 profit or $15,000 US.

We do have to do the calculation and put the profit on schedule D and then exempt it.

Hope this helps.

>> QUESTION:
>>
>> Hi,
>>
>> Last year, we rented out our condo in Vancouver. The
>> plan then was to have the rent cover our mortgage
>> payments for the 12 months that we would be away. A
>> short term solution.
>>
>> Now, we are planning to be away from BC for a longer
>> period of time (approx. 2 years) and wish to sell the condo
>> in the middle of the year, as we are unable to rent the
>> condo for any longer due to strata council by laws.
>>
>> 1) If we sell the condo when there has been a tenant living
>> in it for 12 months, will we pay capital gains?
>>
>> 2) What are our best options to avoid paying this tax?
>>
>> 3) If capital gains would be owed, for how long would we
>> have to make the unit our principal residence again before
>> we can sell it and not pay CGT?
>>
>> Thank you,
_________________________________________________________________

david ingram replies:

If you filed a section 45(2) election with your first year's rental, you
can rent the condo out for up to 4 years (plus 1 in the calculation)
without incurring capital gains tax if you have not bought another
residence that you are lioving in.
See Below:

My question is: Canadian-specific

QUESTION: Dear Mr. Ingram,
I bought a house in the December of year 2000, lived there till the end of December 2000 (3 weeks) and started to rent it out on January 1, 2001. I filed the election 45(2) to claim the house as my primary residence for years 2001, 2002, 2003 and will do it for 2004.
I do not claim a depreciation for those years.
I want to sell the house now. Do I need to move in house first in order to avoid the payment of the capital gain taxes. For how long I have to stay there to be eligible for not paying the capital gain taxes on sold house if I need to move in.

Thank you in advance for you help,
----------------------------------------------------------
david ingram replies:

First I am going to repeat your old question from last July and my answer.

My question is: Canadian-specific

QUESTION: Hi, David!
I would like to know is it possible to use the election under the section 45(2) again if the old house is sold and the new one is bought. Can it be used unlimited number of times by the condition that it is used for each house only once.

Thank you
---------------------------------------------------------------------------
David Ingram replies:

Section 45(2) is intended to allow people to try something out. This means that if you move to a rented condo for a couple of years and rent your house out, you can move back into the house without suffering a capital gains tax under section 45(2).

Since it was passed on June 17, 1972, (32 years ago now) I have never seen it used more than twice by one person.

Does not mean it has not been used more than twice in thirty years, it just means it is unlikely.

There is no numeric restriction but if you are moving in and out of houses, the CRA will treat you as a trader and tax you at full rates.

----------------------------------------------------------
Now, to answer this question. Section 45(2) is NOT something you can plan to use. In other words, your living in the house for three weeks and renting it out and filing a section 45(2) election does NOT make it tax free if you bought the house to rent and not to live in as your personal principal residence.

Your question indicates to me that you are trying to beat the system and did not buy the first house to live in and unless you can show the tax office that you moved every stick of furniture in and really intended to live there, the CRA will not allow it to be sold tax free.

This year, a new policy of the CRA is that they wish form T2091 to be filed with every tax return where a personal house was sold during the year.

If it was your residence and you genuinely intended to live there and were transferred of suddenly got married or could not stand your neighbour or lost your driver's licence or suffered some other disaster that caused you to "HAVE TO" move suddenly, filing section 45(2) will make it tax free provided you did not also own another house that you did live in. If you did own another house that you actually lived in, claiming the house you have filed the 45(2) election for as tax free, will MAKE THE HOUSE YOU ACTUALLY LIVED IN TAXABLE.

If you have a genuine 45(2) election, you do not need to move back in. If it is not a genuine 45(2), moving back in will TRIGGER a tax bill as you move in.

You need a consultation with someone who knows the rules before you make a mistake. I am available in person or by phone at a fee of $350.00 minimum for an hour but not until November now.

As many know, I charge this for US / Canada tax an immigration advice as well. I am not alone though.

If you have a tough US immigration question to ask or one that I cannot deal with (remember I do Immigration AND tax) Joe grasmick is the place to g for a telephone consultation. HIs fee is $295.00 per HALF hour and you can get hold of him at http://s1.amazon.com/exec/varzea/ts/exchange-glance/Y01Y4838730Y0462867/104-8053170-6203936

I have sent two out of town people to him in the last month where it was obvious to me tha tthe people needed a lawyer as opposed to a consultant..

If you want a free answer for a couple of minutes, remember

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"

Canada, about to accept a job with a company that is based out of Texas on a TN Visa. Most of the work will be performed in Washington State but there will also be work at various other client locations across North America as well. I plan to still live in Canada and commute to Washington State or whatever other state the client at that particular time is in. I am being paid in U.S. dollars into a U.S. bank account that I opened that is connected to my Canadian account so I can transfer funds on-line.

1. Should I be setup as a regular W2 employee by my employer in the U.S.?
2. Do I have to file both U.S. and Canadian taxes?
3. Any other suggestions or recommendations?

Thanks,

________________________________
david ingram replies:

Just no time to answer this specifically but this older similar question will help. Very similar question -

QUESTION: Hello,

I am Canadian PR holder and currently work in USA on H1B visa. I get W2 from my current employer in the state of Texas.

I am planning to move to Windsor, Canada and drive to detroit, MI everyday to work for the same employer who has an office in Detroit.

Will I get a W2 for Detroit, MI and I have to file federal tax for US and state tax for MI and also file tax in Canada ?

Can you please provide me the process which should be followed ?

Thnx.

Regards,

---------------------------------------------------------------------------
david ingram replies:
You will get a W2 and file a 1040 and Michigan MI 1040 plus a Detroit City Tax return D-1040NR

Then you will report the income again in Canada and claim a foreign tax credit for the taxes and FICA and Medicare paid in the US on line 431 of your Canadian return.

Your tax will be higher than it is in Texas because Texas has no State tax and Michigan and Detroit have taxes and Ontario has taxes.

QUESTION: I receive a monthly car allowance from work, my work gave me a T220 form to claim my mileage on my taxes for the year.
How do I calculate this, I live in Ontario.
______________________________________---
david ingram replies:

Get hold of Formn T777 - http://www.cra-arc.gc.ca/E/pbg/tf/t777/t777-06e.pdf


I think it is quite self-explanatory. If not, there is a booklet you can read at http://www.cra-arc.gc.ca/E/pub/tg/t4044/t4044-06e.pdf

QUESTION: Hello,

I am Canadian PR holder and currently work in USA on H1B visa. I get W2 from my current employer in the state of Texas.

I am planning to move to Windsor, Canada and drive to detroit, MI everyday to work for the same employer who has an office in Detroit.

Will I get a W2 for Detroit, MI and I have to file federal tax for US and state tax for MI and also file tax in Canada ?

Can you please provide me the process which should be followed ?

Thnx.

Regards,


---------------------------------------------------------------------------


david ingram replies:

You will get a W2 and file a 1040 and Michigan MI 1040 plus a Detroit City Tax return D-1040NR

Then you will report the income again in Canada and claim a foreign tax credit for the taxes and FICA and Medicare paid in the US on line 431 of your Canadian return.

Your tax will be higher than it is in Texas because Texas has no State tax and Michigan and Detroit have taxes and Ontario has taxes.

I’ll send it again, can’t hurt, and might benefit others. Wanted your take with some further elaboration. I’ve decided against the IRA, contributed to my RRSP’s and will file 8891 form to defer the US tax hit on the RRSPs.:
>
> Dear David,
>
> I was doing some quick research online due to my current immigration/work status, to determine how to best start planning for contributing to my retirement (I am 29 yrs old). I came upon your expertise many times and figured I’d email you directly.
>
> I am a Canadian citizen, an xxxxxxxxxx in Hawaii, a xxxxxxxx in Ontario, and I currently work in Honolulu on a temporary, but renewable, TN visa at axxxxxxxxxxxxxx (entering my third year working full-time in the US). I believe based on Canada’s facts and circumstances test, I would be deemed a Canadian resident for tax purposes due to my ongoing ties to Ontario, and plan to file Hawaii, US federal, and Canadian tax returns this year (I filed the same way the past two years, and the tax hit, despite the foreign tax credit is still substantial enough for me to write this email).
>
> I was wondering if you would kindly answer 2 quick questions for me –
>
> 1)I understand I shouldn’t contribute to my Hawaii employer’s 401(k) plan due to the unfortunate Canadian income tax treatment 401(k)’s receive. However, should I contribute to an IRA (Individual retirement account) while I continue to work in the US? As well, I’m hoping all this social security I am contributing to in the US, may one day benefit me if I someday become a US resident. I am trying to start my nestegg for my retirement and don’t really know if my employment will lead me to eventual permanent residency in the US or not; and
>
> 2)If you are on a TN visa and working in the USA (regardless of whether you plan to eventually apply for adjustment of status to an immigrant visa category), is it prudent to break off all ties with Canada if your sole goal is to free yourself of filing as a Canadian resident (I believe there seems to be an inconsistency inherent in doing that, as a TN visa is a temporary visa and you are supposed to return after the year is up back to Canada). I’m wondering if the Canadian tax authorities may have an issue with you not filing a CCRA return as a Canadian resident while on a TN, when for immigration purposes, you are supposed to show an intent to return home after what should be a temporary stay in the US. The whole idea here would be to avoid the foreign tax credit structure, and simply file in one country (the US) – that would be more advantageous.
>
> Any information would be greatly appreciated.
>
> With the highest regards,
>
> Honolulu, HI 968xx
>
> ___________________________________________________________________________
>
>
>
> david ingram replies:

Well, it would be very unusual for a TN visa holder in the US for 3 years to have to file a Canadian return unless he or she had a spouse and seven kids in Canada and went home every weekend.

I doubt if there is any reason for you to file let alone pay any tax to Canada which means that the purchase of an RRSP is a waste and should be reversed by filing form T3012.

In fact, if you have filed Canadian returns for 2004 and 2005, they should likely be reversed as well under article IV of the US / Canada Income Tax Treaty. article IV overrules most of the Canadianisms people have such as some furniture stored in Canada or a favourite car stored at dad's place. GOTO www.centa.com and read the US/Canada Tax Section in the second box down on the right hand side. Pay close attention to Article IV - then read the Judge Teskey decision in the Dennis Lee Case and realize that Dennis Lee was not in the US or another tax treaty country,.

The above is an observation. In reply to your two questions:

1. You are in the position where you CAN contribute to a 401(K). I am assuming here that you are not taxable in Canada as per my observations above. In addition, an IRA would give you a US tax deduction.

2. As I said, it is rare for a TN visa holder to file a Canadian Tax return unless they have a dependent family in Canada and commute back and forth on a really regular basis. Your going to Canada to help out at your old firm for a week or two does NOT by itself, make you taxable in Canada on your world income.. Your ownership of cars and furniture does not make you taxable in Canada by itself when the Treaty is used.

QUESTION: I am a Canadian citizen making American money from my website. The majority of the funds coming from the Google Adsense program. Google however did not send me a tax form, but I made over $4000.00
with them. They say they only send it to qualifying U.S. Publishers.

What are my legal obligations in this matter. Should I even bother including this money in my tax return?

Thanx:
--------------------------------------------------------------------------

david ingram replies:

As a Canadian resident you are taxable on your world income no matter who pays it to you or where and how it is paid.

You need tofile form 2124 to report the income and of course, can then deduct the relevant expenses that you paid to earn the income.

There is a fair list on form 21214 but it is not set up for an internet business per se.

For instance there is no specific place for hosting fees or even your internet service provider.

You also get to dedcut things like bank charges and if you have a separate room set up in your home, you can dedcut the relevant expenses agains t the income. The Office in home form is part of the T2124.

Theoretically, willfully not reporting the $4,000 could result in fine and imprisonment although it would be unlikely.

Better to do it right and come out clean.

Hi David,
>
> Love this email list - thanks alot!
>
> I moved back to Canada in early August/06 (as a student - earning nothing) after having lived in Alaska since August/02 (working). During that time period I filed US taxes, and wrote a letter to the CRA each year deferring taxation of my RRSP under Article XVIII(7) of the convention.
>
> A few questions:
>
> 1. Do I consider myself a resident-alien of the US for tax purposes?
> 2. What, then, is my tax status in Canada? Do I fill out a tax return?
> 3. What do I do about my RRSP this year, as I've contributed nothing for 5 years and have asked for tax deferral the whole time?
> 4. Is there any way I can get tax credits for the tuition I pay in Canada?
> 5. Can I decuct my moving expenses on either tax return?
>
> Thanks so much for the help!
>
> _______________________
>
> david ingram replies:

1. under the US rules you are a resident alien or a dual status alien. Because you had no incomeafdter leaving, yiou should file a 1040 and claime full exemptions and the standard deduction. If you showed yourself as a 'dual status' filer, you would lose your standard deduction.

2. Youare a returnsing Canadian. You do not have to fill out a return if you have no income but then you will not get the GST in 2007.

3. I am assuming that you were deferring the RRSP earnings with the IRS, not the CRA. The proper form would have been on IRS form 8891 to defer the internal earnings with the IRS. You do not need to do anything this year.

4. File the Canadian tax return and put the tuition and education amounts on Schedule 11. It will then carry forward to other years when you will be able to use it.

5. If you are receiving a taxable scholarship or fellowship from the University, you can claim moving expenses. Read the rules on the T1-M moving expense form at http://www.cra-arc.gc.ca/E/pbg/tf/t1-m/t1-m-06e.pdf.