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Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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My Mom, a U.S. Resident, sold a house in Canada. Revenue Canda

Resolved Question:

My Mom, a U.S. Resident, sold a house in Canada. Revenue Canda held back 25% until they "clear" the taxes. We are told she'll get back some of the 25%, then file Candian tax return at the end of the year and get some more back next spring. Question: She now wants to gift the sale proceeds to us four children. Will she have to pay U.S. taxes on the sale proceeds, or will we four children have to pay U.S. income tax on the gifted money? We are only talking about 25,000 each. Thank you!!
Submitted: 8 years ago.
Category: Tax
Expert:  Merlo replied 8 years ago.
Hello c353,

The US has a tax treaty with Canada which allows the country where the property is located to tax any gain on the sale from the property. So your mother will only pay tax on this sale in Canada. See Article VI of the following treaty.

If your mother wants to gift the proceeds to her children, this will likely have no tax consequences.

First, if and when gift tax is ever due, it is paid by the donor and not by the recipient of the gift. However, under current regulations, each taxpayer is allowed to give gifts in their lifetime of up to $1 million before any gift tax becomes due. This is part of what is called the Uniform Tax Credit Act.

In addition to the $1 million lifetime exemption, each individual is allowed to give annual gifts of up to $13,000 to any number of individuals, and those gifts do not even apply towards the lifetime exemption, nor do they need to be reported. Gifts which exceed the annual exclusion of $13,000 must be reported by the donor by filing Form 709 with the IRS to report the value of the gift. However, no tax is actually due unless that donor has already reached his $1 million lifetime limit. The amount reported then reduces that donor's remaining lifetime balance that he may give in non-taxable gifts.

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Thank you C353.

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