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Arthur Rubin
Arthur Rubin, Tax Preparer
Category: Canada Tax
Satisfied Customers: 1493
Experience:  Tax preparer with 23 years experience, including US/Canada tax returns.
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I am a permanent resident of Canada (British passport holder),

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I am a permanent resident of Canada (British passport holder), with a Canadian spouse.

I moved here in 2009, keeping property in the UK. I have declared the income from both of these properties on all of my tax returns since landing.

1) My assumption was that I would only be liable for capital gains in Canada if I dispose of these assets (realize the gains). However, I read something that indicated that I may be liable if I leave the country - even though the assets are not disposed of. Could you clarify?

2) In terms of the gain recognized...

Is the gain assessed at the MV of the asset at the point where I enter the country?
E.g. Proceeds, $120k; less MV at 2009, $100k = Taxable gain $20k

Or is it the proceeds, less original cost pro rated for my time resident in this country?
E.g. Proceeds, $120k; less orginal cost in 2005, $50k = $70k*(8yr held / 4 yr in Canada) = Taxable gain $35k

Or something else altogether?

3) Are there any legal ways I can structure the property to minmize the tax exposure in Canada?

Your thoughts would be appreciated.

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Customer: replied 3 years ago.

In terms of priority an answer to question 2 is the one I want most, then question 1.


 


Unfortunately I think I know the answer to question 3, but thought it would be worth asking anyway.


 


Thanks


 

I think I've got it, but I can't answer the structuring question. There may be a way to keep the property from being taxed if you transfer it to a Canadian trust; which might still retain it even if you become a Canadian non-resident. I wouldn't know how to set it up, though.

The simplest way to avoid Canadian taxation of (non-Canadian) capital property is to avoid becoming a "resident" of Canada. Being a "permanent resident" does not necessarily make you a "resident". However, if you are in Canada for 183 days in the year, you are considered a Canadian resident for tax purposes unless your "residential" or "domicilliary" ties to another country (the UK?) are stronger than your ties to Canada.

.

For question (2), the answer is the first. (This may also provide an answer to your question (1).)

.

For Canadian tax purposes:

Any capital assets you hold when you become a resident, you are considered to have purchased for FMV (fair market value).

Any capital assets you hold when you become a non-resident, or die, you are considered to have sold for FMV.

.

Does this answer your questions?

Arthur Rubin, Tax Preparer
Category: Canada Tax
Satisfied Customers: 1493
Experience: Tax preparer with 23 years experience, including US/Canada tax returns.
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