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Stephen G.
Stephen G., Financial Advisor
Category: Capital Gains and Losses
Satisfied Customers: 6168
Experience:  Senior Tax Expert; CPA/PFS(retired)Personal Financial Planner; Small Business & Professional Mergers & Acquisitions
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I am a US citizen residing in the US. In 1991 I bought a

Customer Question

I am a US citizen residing in the US. In 1991 I bought a home for use by my mother in Westmount Quebec. i paid $425,000Can. I added central A/C for $35,000. In 2009 I fully renovated the home at a cost of $600,000CAN. I have never charged my mother (a widow) rent. I've paid all of the taxes and utilities. I'd now like to sell the home for $1,300,000 CAN less a 5% brokers commission.
What are the tax implications ?
Gil Labbe
Houiston, Texas
Submitted: 6 months ago.
Category: Capital Gains and Losses
Expert:  Stephen G. replied 6 months ago.

Well, as far as Canadian income taxes are concerned, the process is quite involved compared to what we normally do here in the US on the sale of real property. Here's a link to an article by a Canadian Chartered Accountant who has laid out the various steps that must be undertaken to comply with the Canadian Capital Gains Tax.

http://www.thecoastgroup.ca/faq/non-residents-renting-property-in-canada-2/

As far as your US income tax on the Capital Gain is concerned, the capital gain is figured in the normal way by taking your original cost $425,000 plus improvements ($35,000. + $600,000), plus any selling/closing costs

$65,000 + ? Closing Costs, equals ($1,125,000), less the Gross Selling Price ($1,300,000) equals a Capital Gain of $175,000Can. These figures will have to be translated to US dollars when doing your US return.

Also, and more importantly, you will receive a credit against your US capital gains tax on the sale for the taxes you pay to Canada after conversion to US dollars. So, there is no double tax on the capital gain.

Steve G.

Expert:  Stephen G. replied 6 months ago.

Just checking in...............I see that you have had a chance to view my comments. Do you have any follow-up questions or comments or may I be of any further assistance?

If not, please remember to rate my response as that is the only way I will receive my share of any payment you already made or any credit that the site has provided for responding to your question.

Thanks very much,

Steve G.

Expert:  Stephen G. replied 6 months ago.

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Customer: replied 6 months ago.
Stephen,I know the effect on my US taxes, i was looking for ways to reduce the exposure in Canada,Gil Labbe
Expert:  Stephen G. replied 6 months ago.

Well, your question was "What are the tax implications"?

There's really nothing different in Canada except the way they compute the taxable portion of the gain, that being 50% of the gain is subject to their tax. Unfortunately as you can see from the reference I provided, they collect an amount initially that is more than the tax that you will actually owe when you file the return and you should receive a refund.

The important thing to remember is that you'll receive a credit against your US taxes for the tax you pay Canada.

The point being that even if your Canadian tax were reduced somehow, your credit against your US taxes will be less so that no matter what you pay Canada, the bot***** *****ne is that the total of what you will pay is the same, as you'll either pay it to Canada or the IRS; your total obligation will be whatever your US taxes are, which of course is based in part on whatever your other income is for the year of sale.

Customer: replied 6 months ago.
OK, Thanks,Gil Labbe
Expert:  Stephen G. replied 6 months ago.

Gil:

I would appreciate it if you would take a moment to rate my response as without a positive rating I will not receive anything for my efforts on your behalf. If you are having problems with the rating system, you merely have to indicate your rating in words here & Customer Service will credit me for my work. There are no additional charges to you if you provide me with a positive rating.

Thanks very much,

Steve G.

Expert:  Stephen G. replied 5 months ago.

............................

Expert:  Stephen G. replied 3 months ago.

Gil:

Just checking in...In reviewing my "open" questions, I see that you have viewed my previous comments but have not provided a rating for me.

Is there something else I can do to satisfy you, or may I clarify anything with respect to your question?

Despite the extended time following your question & my response, I would be happy to clarify anything for you or to answer any follow-up questions you may have.

If you don't have any additional questions or comments, then I would appreciate it if you would provide a rating so that I may close out your question favorably & receive my share of the payment you made some time ago.

Thanks very much,

Steve G.

Expert:  Stephen G. replied 2 months ago.

Did you experience problems with re-locating your question after I responded to it? AND/OR,

Did you by any chance experience problems with the rating system?

I ask as around the time of your question the site was having some issues in this regard and some of the ratings weren't credit to us. If that was an issue with you, perhaps you could just indicate your rating in words, hopefully good, very good or excellent. If you would take a moment to do that, customer service with credit me with responding to you and close out the question favorably.

Thanks very much,

Steve G.

Expert:  Stephen G. replied 2 months ago.

Just checking in.....................

I'd like to close out this question before the end of the month, if possible.

I would appreciate it if you would take a moment to let me know if I can assist you further and/or if you would provide a rating for my responses as indicated above.

Thanks again,

Steve G.

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