Selling House In Canada

[cdndesro 44]

I’m curious if anyone has some insight on this hypothetical, but possibly realistic, scenario. 
 

I list my house to sell on April 10

I cross the border and activate my visa on April 15 and return to Canada April 16 to pack belongings. 
House sells April 20 and closes June 1. 
 

In this scenario, would I be considered a non-resident and be subject to the 25% withholding tax when selling the house (primary residence I’ve lived in since it was purchased 7 years ago)?

[iwannaplay54 985]

20 minutes ago, cdndesro said:

I’m curious if anyone has some insight on this hypothetical, but possibly realistic, scenario. 
 

I list my house to sell on April 10

I cross the border and activate my visa on April 15 and return to Canada April 16 to pack belongings. 
House sells April 20 and closes June 1. 
 

In this scenario, would I be considered a non-resident and be subject to the 25% withholding tax when selling the house (primary residence I’ve lived in since it was purchased 7 years ago)?

Primary residence sales aren’t taxed in the US unless the capital gain exceeds $500k for a married couple.

You are an LPR as soon as you cross the border with your immigrant visa.

Edited February 24, 2022 by iwannaplay54

[cdndesro 44]

4 minutes ago, iwannaplay54 said:

Primary residence sales aren’t taxed in the US unless the capital gain exceeds $500k for a married couple.

You are an LPR as soon as you cross the border with your immigrant visa.

I am referring to the Canadian 25% withholding tax for non-residents who sell property in Canada. If I cross the border to the US and activate my visa before the house is sold, am I essentially a non-resident and subject to the withholding at that point?

 

As for the US tax, I will have to pay that on any amount I make over $500k on the sale on my first tax return in the US for 2022 filing correct?  So if the gain is $550k USD on the sale, my wife and I will have to pay tax on the $50k portion?

[aaron2020 11,651]

1 hour ago, cdndesro said:

I’m curious if anyone has some insight on this hypothetical, but possibly realistic, scenario. 
 

I list my house to sell on April 10

I cross the border and activate my visa on April 15 and return to Canada April 16 to pack belongings. 
House sells April 20 and closes June 1. 
 

In this scenario, would I be considered a non-resident and be subject to the 25% withholding tax when selling the house (primary residence I’ve lived in since it was purchased 7 years ago)?

Once you enter the US with your immigrant visa, you will be a US legal permanent resident.  You will no longer be a resident of Canada.  You can only have one primary residence at a time.  It's either Canada or the US.  It can't be both.  

[iwannaplay54 985]

2 hours ago, cdndesro said:

I am referring to the Canadian 25% withholding tax for non-residents who sell property in Canada. If I cross the border to the US and activate my visa before the house is sold, am I essentially a non-resident and subject to the withholding at that point?

 

As for the US tax, I will have to pay that on any amount I make over $500k on the sale on my first tax return in the US for 2022 filing correct?  So if the gain is $550k USD on the sale, my wife and I will have to pay tax on the $50k portion?

If you choose to be a resident for that tax year you would probably pay 15% tax on the difference (long term capital gain rate for MFJ < 500 AGI

[aaron2020 11,651]

If the capital gains are significant, then it may be worth a little bit of money to get professional advice from a CPA versed in US and Canadian taxes.  

[mam521 1,699]

Likely, yes.  Getting the paperwork (Certificate of Compliance) is a nightmare in addition to the witholdings and the section 216 return.  If you can sell it before you leave, it's significantly easier.  

[TripleCity 20]

If you can put it on the market and close before you activate the visa that is cleaner and more simple. But if you can’t, then no choice then. Will have to see how it pans out tax wise. 

 

In my opinion from consultation and my research your principle resident is a significant tie to Canada until you transfer title on closing day. You could argue that until you sell your home and transfer title on your principle residence you are a Resident of Canada. Resident and residence are two different concepts. 
 

I also agree, it is worth paying the money for a tax account for what you could be saving. On closing day the lawyer may ask you to sign a document where you declare you are a resident of Canada. Before you talk to your real estate agent or lawyer  talk to your Accountant! 

[Idlewild 26]

FWIW, I am planning to sell my home in Canada before moving.  I assume you are asking this because you may have spent significant time in Canada, as a participant in this crazy real estate run-up in Toronto/Vancouver.  

 

As others have said, I think it will simplify your life if you sell beforehand for 2 main reasons:  one less "tie", and no risk of additional tax on the sale (from the IRS).

Edited February 25, 2022 by Idlewild

[ClemsonC 62]

Has anyone else experienced this since the OP posted? 
 

My husband is going to reistablish domicile next month, and I will follow and activate the visa in July after our house sells. 
 

Myself and our kids will still be living in the house, but my husband will already be gone. Can they really withhold the 25% from with the certificate of compliance even though I was still living in the home until it sold and moving afterward? 

[cdndesro 44]

1 hour ago, ClemsonC said:

Has anyone else experienced this since the OP posted? 
 

My husband is going to reistablish domicile next month, and I will follow and activate the visa in July after our house sells. 
 

Myself and our kids will still be living in the house, but my husband will already be gone. Can they really withhold the 25% from with the certificate of compliance even though I was still living in the home until it sold and moving afterward? 

It is such a grey area with the whole thing. From everything I’ve looked at and speaking with an accountant, a house is the strongest tie you have for residence. In my own opinion, you may be fine on the Canadian withholding and have an argument as what residency is. I really think it depends on the real estate lawyer and how picky they might be as a non-resident does have to declare that’s what they are on closing. In your situation, he is going to live with his sister and hasn’t purchased property, so the Canadian house is the only (primary) residence. With you staying in the house until the closing date, I would feel that’s an even stronger case for you regarding non-resident withholding. Maybe it makes your case even stronger if your husband comes back a few times during the closing period as well. You may still be subject to US capital gains tax since you both own the house if you net over US$500k. 
 

That said I couldn’t find any black and white rules and am in no way well versed in this - just providing how I would look at it.  My situation was a little more straightforward as I solely own my house and my wife has never lived in Canada, so I ended up selling it and will wait to cross to the US the day of the closing next month just so I don’t have to worry about any interpretation. I’d suggest talk to your real estate lawyer about it and an accountant who understands immigration/emigration.