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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29558
Experience:  Taxes, Immigration, Labor Relations
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I am a Cdn citizen living in the US past 14 years with

Customer Question

I am a Cdn citizen living in the US for the past 14 years with a permanent residency. I'm selling a piece of land in Canada that I own and want to know what the reporting requirements/tax implications of that are.
Submitted: 2 years ago.
Category: Tax
Expert:  Lev replied 2 years ago.
Hi and welcome to our site!First of all - as an US resident - you should report all your worldwide income.So you do need to report the selling transaction on your US tax return - and calculate possible gain - and that gain will be included into your taxable income.Second - if the same income is taxable in the US and abroad - you will be able to claim a credit for foreign taxes - thus effectively will avoid double taxation of the same income.
Customer: replied 2 years ago.

Yes I am aware that I need to report the selling transaction on my US tax return. How do they calculate the gain for a piece of vacant land, is it just the difference in original purchase price and selling price? How is the exchange rate accounted for?

I have read conflicting information regarding the requirement to report to Canada Revenue Agency (CRA). Some sites say that as a non-resident selling property in Canada I have to pay an estimate of the tax and have the attorney hold that estimate in escrow until a clearance certificate is received from CRA. If I do this, doesn't that result in double taxation when I report on my US return? Or am I expected to give the CDN gov't my money and then get it rebated back to me?

Expert:  Lev replied 2 years ago.
Your US and Canadian tax obligations are different - and regulated by different tax laws - while ther eis a tax treaty between these countries that eliminates double taxation.You are a non-resident for tax purposes if you:normally, customarily, or routinely live in another country and are not considered a resident of Canada; ordo not have significant residential ties in Canada; andyou live outside Canada throughout the tax year; oryou stay in Canada for less than 183 days in the tax year.As a non-resident of Canada, you pay tax on income you receive from sources in Canada. For the procedures you must follow if you sell or transfer, or plan to sell or transfer taxable Canadian property (such as real estate, business property, or unlisted shares of a Canadian corporation), see Disposing of or acquiring certain Canadian property.http://www.cra-arc.gc.ca/tx/nnrsdnts/cmmn/dsp/menu-eng.htmlGenerally, if you have disposed of a taxable Canadian property (TCP), you are required to file a tax return.Non-resident individuals must file their Canadian income tax return by April 30 of the year following the year in which the disposition took place. Copy 2 of the Certificate of Compliance must be attached to the return.However, you are not required to file a tax return for the year if all of the following apply:you are a non-resident of Canada;no tax is payable for the tax year in which you have disposed of the property;you are not liable to pay any amount to us for any previous tax year; andeach Canadian property you have disposed of in the tax year is:excluded property; ora property for which you were not required to remit an amount or provide acceptable security for us to issue a Form T2064 or Form T2068 (Certificate of Compliance).Generally - you would nee to work with Canadian tax preparer to report that transaction.
Expert:  Lev replied 2 years ago.
So - your first step - to file your Canadian tax return as a nonresident - and calculate possible tax liability (if any) on that sale transaction.
Then - you will file your US tax return and will report that sale transaction on form 8949.
The gain is calculated as (selling price) MINUS (basis)
The basis is mainly your purchase price (assuming the property was purchased) adjusted by purchase and selling expenses.
As you held the property more than a year - the gain will be taxed at reduced rates - most likely - not more than 15%.
If the same income is taxable abroad and in the US - you may claim a credit for taxes paid abroad - so the same income would not be taxed twice. Use the form 1116 -
http://www.irs.gov/pub/irs-pdf/f1116.pdf
please find instructions here -
http://www.irs.gov/pub/irs-pdf/f1116.pdf
The credit is limited by the US tax liability on the same income - the form 1116 is used to calculate the amount of credit. Means - if tax liability abroad is higher - there will not be US taxes on that income, but if tax liability abroad is lower - in the US you will pay the difference after the credit will be applied.
Let me know if you need any help.