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I am a retired Scotiabanker and we own a condo in Florida…

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Hi, I am a...

Hi, I am a retired Scotiabanker and we own a condo in Florida and in today's paper they are advising that it be put in a trust rather than owning it personally. They mention that tax will have to be paid if sold if a person's international estate exceeds $5.5 million, which mine will when my dad dies. (he is 101) I understand that we would have to do this through a US lawyer. My question is: If we sell the condo (approx value $85,000. Gain, approx $25000) would we pay capital gains tax in US and have to file a US tax return, or, would we just pay capital gains in Canada? And what does the total international estate have to do with it? How does it fit in? Would setting it up in a trust eliminate any tax? Thanks, ***** *****

Accountant's Assistant: Since estate law varies from place to place, can you tell me what state this is in?

Florida.

Accountant's Assistant: Has anything been filed or reported?

No, we have not sold it, but are thinking of selling. The only thing I have filed is the Closer Connection form which I send to the US every year.

Accountant's Assistant: Anything else you want the lawyer to know before I connect you?

I don't think so.

Submitted: 3 months ago.Category: Tax
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Answered in 33 minutes by:
12/28/2017
Tax Professional: Lev, Tax Advisor replied 3 months ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,709
Experience: Taxes, Immigration, Labor Relations
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Hi Bette,

My question is: If we sell the condo (approx value $85,000. Gain, approx $25000) would we pay capital gains tax in US and have to file a US tax return, or, would we just pay capital gains in Canada?

Because the property is located in the US - you will be required to file an US tax return as a nonresident and will be responsible for US income tax on that gain.

Because you are a Canadian resident - you will be required to report that income on your Canadian tax return - and depending on your circumstances - that gain will be subject to tax in Canada - BUT

you will be able to claim a credit for US taxes on your Canadian resident tax return - thus effectively will avoid double taxation of the same income.

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Tax Professional: Lev, Tax Advisor replied 3 months ago

And what does the total international estate have to do with it? How does it fit in?

That is related to estate taxes - not to income taxes. Nonresident aliens are subject to estate taxes in the US but ONLY on assets suited in the US.

Real property in the US will be subject to estate tax when the owner dies.

Would setting it up in a trust eliminate any tax?

Contributions into revocable trust may help to avoid estate taxes.

But when the property is sold - the trust most likely will pay larger income taxes on the gain.

So you might want to work with your tax adviser to verify all possible circumstances.

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