- - CAPITAL GAINS Tax in Canada on Foreign Property When Exiting

[us2yow]

Hi, can someone here help out with the very specific question.

I am a Permanent Resident (PR) now residing here in Canada and own a property overseas (US). Right before I moved up to live here full time as PR and also to work towards citizenship, I had the value of my property appraised in the US (let's call my apartment's pre-move fair market value of appraisal - Value A).

When I ultimately exit Canada later on to move anywhere and relinquish all ties to be classfied as non-resident here in Canada - And my Questions start here:

1) Will I have to pay tax on the capital gains to Canada on my US property and can you give me a fair idea (no need to be super accurate) of how much capital gains percentage taxed in Canada is ?

2) What two amounts will be used to calculate difference for capital gains ? - A Value B (which is the new fair market assessment soon after I moved and wrapped up here?) MINUS Value A ??

3) As regards Value B in Question 3, when should that second fair market value assessment (represented by Value B) be conducted to be considered for Capital Gains calculation ? - is there some rigid rule that says the value as assessed within x no of months after leaving and declaring non-residency or x days ...ete etc? There must be something ? Or maybe not ?? Basically, How fluid or flexible is that time frame when the latest assessment needs to be conducted for capital gains.

4) Finally, for the iniitial value in the Capital Gains calculation described above, is Value A the correct one to be used ? My reasoning is because that is the Value of the Apt as assessed right around when I moved up to Canada to live here full time for tax purposes and after which I also filed my very first Canada Tax return as new PR. That is, If I moved Sep 2010 to Canada, the apt assessment was done say in July/August 2010.

Much appreciate your comments/insights !

 

[us2yow]

Anyone have a good response to the above question ??

 

[me2land]

Only realized capital gains are taxed. So if you decide to sell you house before you relinquish all ties and become non tax-resident of Canada then Yes. Otherwise you pay no taxes.

In Canada only 50% of capital gain is taxed at your marginal tax rate.

¬m2l

 

[us2yow]

I am confused.

Note: That house is in the US. So are you saying that:

a) If I DONT sell my house in the foreseeable future; and

b) If I Relinquish all ties and become non-resident once I move (note: selling house situation does not apply):

THEN, I dont have to pay tax on capital gains OR I do have to pay taxes on cap gains????

 

[me2land]

You do not have to pay taxes.

¬m2l

 

[us2yow]

Are you sure ? What makes you say that ?

I thought one has to pay taxed of capital gains on the difference in deemed value of overseas property (OP) BETWEEN (a) value of that OP when person left Canada after living here and also declared non-residency with all reqmts for non-residency satisfied; and (b) original value of that OP when they first moved to live here (for tax purposes). So value (a) - value (b) where if value a is more of course it is a +ve value (appreciation)

You still say no ? Any CRA rule/clause references to prove/disprove point?

 

[steaky]

With regards to question 3, does the US/State government provide you any information about property assessment (about how much it is worth) as it is in the case of a property in BC? Or in order to get this information, you need to do a formal property valuation? Sorry for asking instead of answering your questions.

 

[Jonboy]

1) Will I have to pay tax on the capital gains to Canada on my US property and can you give me a fair idea (no need to be super accurate) of how much capital gains percentage taxed in Canada is ?

If you have been tax-resident in Canada for more that 60 months then yes. If you are tax resident in Canada for less than 60 months then there is no capital gains tax on property that you owned before you became tax resident and still own when you cease to be tax-resident.

If you do have to pay then guestimate at 20% - 25% of the increase in value.

2) What two amounts will be used to calculate difference for capital gains ? - A Value B (which is the new fair market assessment soon after I moved and wrapped up here?) MINUS Value A ??

Assuming you have been in Canada for more than 60 months it is the fair market value on the day you emigrate less the fair market value on the day you immigrated.

3) As regards Value B in Question 3, when should that second fair market value assessment (represented by Value B) be conducted to be considered for Capital Gains calculation ? - is there some rigid rule that says the value as assessed within x no of months after leaving and declaring non-residency or x days ...ete etc? There must be something ? Or maybe not ?? Basically, How fluid or flexible is that time frame when the latest assessment needs to be conducted for capital gains.

No hard and fast rules. The valuation has to be reasonable given the circumstances.

4) Finally, for the iniitial value in the Capital Gains calculation described above, is Value A the correct one to be used ? My reasoning is because that is the Value of the Apt as assessed right around when I moved up to Canada to live here full time for tax purposes and after which I also filed my very first Canada Tax return as new PR. That is, If I moved Sep 2010 to Canada, the apt assessment was done say in July/August 2010.

Much appreciate your comments/insights !

This will almost certainly be OK.

 

[us2yow]

Thanks a milliionJob Boy. 3-4 more quick questions. I moved up to reside full time as tax resident in July 2010 and filed my first CRA filing for 2010 in 2011. I will be ready to apply for citizenship sometime in late 2013 - early 2014. So going by what you said, lets say:

Scenario A ) Hypothetically, if I applied for citizenship and then left before July 2015 (lets say for whatever valid reasons including most importantly that the job market is so so bad for me here that I simply cannot subsist and have dipped into all savings etc. ALSO, incidentally, no rule says you cannot leave after you apply for citizenship, particularly if on the 'bacon on the table' front it is so extremely hard to find a professional job in these very tough times).

Scenario B) I continue living here full time - as I am now - for tax purposes through my citizenship process and past the 5 year mark of July 2015 (this also means I did not declare non-residence and still file taxes to CRA past 2015 as I live here full time).

MY QUESTIONS-------------------------

Q1) So, are you saying that UNLESS I left before 2015 (using the rules you gave me) - which is Scenario A, I will definitely have to pay Capital Gains if I still hold on to my US property.

Q2) FURTHER CLARIFICATION ON Scenario A : Now, in Scenario A , which is if I left before July 2015 (BUT....BUT and heres the catch - but I did not officially declare non-residence- ie. I still have my CDN credit card, OHIP, Bank account but of course gave up renting and thats about it), and I left for a 365 days or a Year and 3 months , say to go stay with my parents to cut some costs but continue to do some consulting work from their home in the East)....Will I then pay Capital Gains at any point ? Note that I left after applying for citinzenship (not for good but with a 1 year + hiatus) and before that 5 year mark as tax resident you mention - so are you saying I dont pay Cap Gains then???.

Q3) I may likely come back after that hiatus OR NOT. If I dont move back to live full time (Scenario C) then I only come up for citizenship interviw, test, formalities oath but otherwise work somewhere else. If I do come back after that hiatus (Scenario D), it is to come back to live again - but also in a sense go back to looking for work, or doing other overseas consulting work to stay afloat until I get my citizenship.

Q4) What about Cap Gains with Scenario C versus Scenario D ?