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.
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.