So, I've been doing a bunch of research on capital gains and stumbled upon something that's scaring the bejeezus out of me...

We bought our house in Calgary two years ago, right before the boom, and have seen a nice increase in it's value since. I know that if we were to sell and stay in Canada, we wouldn't have to pay capital gains tax because it's our primary residence. However, I just read something that... I *think*... says that we might have to pay if we leave Canada.

"If a resident of Canada moves to another country, and severs residential ties with Canada, he/she is deemed to be an emigrant of Canada for tax purposes. When this happens, the person is deemed to have disposed of almost all their property and re-acquired it at fair market value. Tax will be payable on any capital gains arising from the deemed dispositions."

via http://www.taxtips.ca/personal_income_tax.htm

Has anyone been through this? I'd appreciate any insight here, as the gains we've made were going to fund our new home plus our kids' college education. Please please please say this isn't so...

I sold my apartment in Vancouver 3 months before I left the country (deal closed April 2005, I moved July 2005). It was my primary residence (I lived in it). I was told by a financial advisor that as it was my primary residence it was NOT subject to capital gains.

I received no tax submission slips for capital gains (which I've had before for investments) for this. I filed 2005 taxes without issue.

IMHO you can relax. However if you want to double check (and I suggest you do...you don't know me or anyone else here and this is finances! ), the International Tax office is amazing for answering questions for Canadians exiting the country. 1-800-277-5177



edit: I didn't read your link. It would make sense to me though that from the little you quoted that if a person completes emigration (leaves the country) and then sells the property/home after leaving, then yes, capital gains apply...because it's not your primary residence any longer. Again, Revenue Canada should be able to clarify that. There may be some gray area about if it's on the market before you leave and then sells after.

Also, look around at Serbinski's tax forums: http://www.serbinski.com/ I'm sure something will be covered there.

Thank you SO much! I will definitely be calling that number on Monday - what a great resource.

Yeah... I'm wondering if the penalty comes only if you sell AFTER moving to the States. Our plan is to sell then move roughly 3-5 weeks later. We were also considering re-investing some of our profit in real estate here to take further advantage of the boom, but after reading a bit, I'm thinking we might be better to invest elsewhere with all of the taxes involved (it being a secondary property and living out of country). Perhaps more ?s for the International Tax office, eh?

Hey, I just tried that number but instead of reaching the International Tax office, I got Home 1-2-3, a mortgage company...? Could you double-check that and let me know if it's a different number? Thanks!

Laura...

The number is 1-800-267-5177

Nevermind... just Googled it myself. It's actually 1-800-267-5177. Now, if I could just get through.

did you hear anything, laura? man, that's really going to suck if we have to pay capital gains. let me know what you find out - i'm going to ask our financial planner. he didn't mention anything about this before, but now i want to be sure.

No worries. I was told that as long as you sell before you take up residence in the States, and that your house was 100% owned by you, i.e., you didn't rent out any portion of it, you're fine (just like you would be if you weren't moving out of country). It'll mean filling out a bit more paperwork at tax time next year, but you won't owe anything. (Can you imagine???????)

Here's a direct link w/more info:

http://www.cra-arc.gc.ca/E/pub/tg/t4037/t4...ml#P4419_154030

That'll teach me to do phone numbers from memory. I'm glad you got it sorted out.

FYI, last year, I sold my house in Toronto and moved to the States after the closing. Acccording to my cross-border tax preparer, it was "a non-taxable event." It did not appear in any way on my tax return.

thanks for the info - i did check myself, and was told the same thing. thank goodness!

If you are considered a US resident for tax purposes for the entire year, and you have lived in the house less than 2 out of the past 5 years, then it may be subject to tax by the IRS.

http://www.irs.gov/faqs/faq-kw127.html

But if we're not residents the entire year (only the last three months of 2006, potentially), then this shouldn't apply, right? I took a look at the links and publications included, but didn't see anything specifically addressing someone who only lives in the States for part of the year.

Here is a good starting point.
http://www.irs.gov/businesses/small/intern...d=96392,00.html

It's kind of complicated your first year.

Thank you, but question... the above link applies to non-USCs, but I am the USC in this case, sponsoring my husband. (Doing DCF - we're both residing outside of the States right now.) I'm trying to find info that's relevant to a USC, living outside of the States as a landed immigrant and owning property there, selling said property and moving back to the States for the last three months of the calendar year. The property is jointly owned by my husband (alien-to-be) and myself, yes, but the only tax info I've seen thus far is for non-USCs. I'm sure we'll have an interesting time filtering through all of the info relevant to him, but I can't seem to find a starting point for me.

Will I, as a USC, be subject to capital gains tax for selling my foreign principal residence, 100% owned (read: not rented out), but also not lived in for a full two years (built and moved in January 2005)? It seems that if this is the case, no one in their right mind would sell their property and move to the States within the same calendar year. If it turns out that we WILL owe, I'd like to find out asap as we may very well postpone our move to avoid it.

I tried calling the IRS help line earlier today - thinking that might be my best option for an accurate answer as our case is a bit complicated. Of course, it rang ten times then disconnected...

WHen one is living abroad, you can only get taxed on Capital Gains for those gains that are on property in the US. You cannot be taxed on Capital Gains for property that is located outside of the US if one is living abroad.

Hi Zyggy...

So, if I'm understanding you correctly, we would not pay capital gains while still living here. Does this mean that, as long as we sell our property before moving back to the States, that we won't pay then, either? Does it matter that we'll have moved back to the States in the same tax year as when we sold our Canadian property?

I'm hoping this is correct. It seems odd that Canada won't tax us on our primary residence, but the States would, even when it's on foreign soil and sold before we move back.

what zyggy says sounds right to me. why would we pay US capital gains on a property located in canada?

anyway, that's what i'm sticking with. we sold our house last night (woohoo!) and i don't plan on giving any of that money to either government!

Please reference the above. I could not find any mention of this in either Publication 54 http://www.irs.gov/publications/p54/ch01.html

or Publication 523 http://www.irs.gov/publications/p523/

Yay for you guys! Hey, btw, did you guys use a realtor or sell it yourselves? We're debating... it seems almost silly to use a realtor in this hot market, but we've got a guy who did an appraisal for us back in February we might use if we decide to go that route. Maybe we'll see if he's willing to budge on his commission...

I used a realtor in Toronto in a hot market last Fall.

For one thing, they find qualified buyers. You don't need the deal to fall through! Also, they network with other agents who already have buyers looking for places like yours. On your own, you'd have to rely on word of mouth and a sign on your lawn ... maybe an expensive ad in a newspaper that gets lost in the clutter. They also arrange, advertise, and run open houses for you.

There are some things here I prefer to use a professional. If you want to move soon after getting the visa, this would be a consideration. Unless you need more waiting in your life!