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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
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Experience:  10 years experience
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We have a Canadian Irrevocable Trust owning a house in the USA - never rented;no income at

Customer Question

We have a Canadian Irrevocable Trust owning a house in the USA - never rented;no income attached to it. If we sell that house, does the Cdn Trust file a return with the US tax department and what would the tax rate be on the capital gain?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.
Yes - the foreign trust will be required to report the sale transaction on the US tax return because that woudl be income from US sources.As that woudl be a gain realized from the sale of real estate - it will be classified as effectively connected to trade or business in the US and will be taxed at the same tax rates as for US residents.If proceeds are not distributed to beneficiaries - the gain woudl be taxed for the trust - and as that is a long term capital gain - tax rates are most likely ~15%.When proceed are distributed to beneficiaries - taxable gain is passed to beneficiaries as well - and will be taxed for them in similar manner.We also need to consider the total gain - as there possible additional tax liability - such as AMT and Net Investment tax.