Selling primary residence in Canada

[Paul H 4]

My fiancee Jennifer is under the impression that she can't activate her k-1 visa until after the sale of her primary residence in Canada for fear of being taxed with a 40% capital gains tax since she would no longer be a resident of Canada once she made her POE to the states. Is anyone here familiar with the tax laws in Canada to confirm or debunk this?

Thanks!

[Paul H 4]

Doing a little research on my own it appears the capital gains concern isn't an issue if the sale is shortly after becoming a non-resident since there won't be much of any gain. The real concern is that the purchasers attorney will withhold 25% of any gains from the sale to give to the government. It appears you either get that back after the next years return is filed or you could file a proposed disposition of property form to determine what the actual withholding amount should be. Then the attorney receives a compliance letter telling them how much to withhold.

Here's to hoping for a quick sale

[Krikit 1,163]

Hi there. I was in the same situation. My home in Canada went under contract while I was still living there. Unfortunately, the closing date was after the expiry date on my visa, so I had to leave before it closed. As it turns out, there are no tax or capital gains issues if the home was your principal residence prior to emmigrating. There will be a hold on 25% of the funds until Canada Revenue gives the all-clear on whether she owes any back-taxes. If she is current, a release document will be sent to the closing attorney. If she has any outstanding amounts, they will deduct those monies and release the remainder. There were some other details related to all this which I cannot recall, but if she speaks with the closing attorney, he/she will be able to explain it properly. The good news is that this is good news.

[Paul H 4]

Hi there. I was in the same situation. My home in Canada went under contract while I was still living there. Unfortunately, the closing date was after the expiry date on my visa, so I had to leave before it closed. As it turns out, there are no tax or capital gains issues if the home was your principal residence prior to emmigrating. There will be a hold on 25% of the funds until Canada Revenue gives the all-clear on whether she owes any back-taxes. If she is current, a release document will be sent to the closing attorney. If she has any outstanding amounts, they will deduct those monies and release the remainder. There were some other details related to all this which I cannot recall, but if she speaks with the closing attorney, he/she will be able to explain it properly. The good news is that this is good news.

Thanks for the info Krikit! How long did it take for them to release the 25% in your case?

[OBX 51]

Hi there. I was in the same situation. My home in Canada went under contract while I was still living there. Unfortunately, the closing date was after the expiry date on my visa, so I had to leave before it closed. As it turns out, there are no tax or capital gains issues if the home was your principal residence prior to emmigrating. There will be a hold on 25% of the funds until Canada Revenue gives the all-clear on whether she owes any back-taxes. If she is current, a release document will be sent to the closing attorney. If she has any outstanding amounts, they will deduct those monies and release the remainder. There were some other details related to all this which I cannot recall, but if she speaks with the closing attorney, he/she will be able to explain it properly. The good news is that this is good news.

I went through the same thing and thanks to Krikit's information back then I knew what to ask my lawyer. Turns out my lawyer was well aware of what forms to submit to CRA and received the certificate of compliance in about 2 -3 weeks (they told me it could take about a month.) In my case, I POEd mid June, my house closed end of July and since the lawyer had the CRA form by then all funds were released on closing.

Good luck.

[Krikit 1,163]

It was only a couple of weeks for me, also.

[Paul H 4]

For those of you that POE'd prior to the closing of the sale of your house, what issues if any did you have not being in Canada for the closing? Did your lawyer handle it for you? Did you just have them fed-ex the documents for you to sign? Any advice?

Thanks!

[OBX 51]

For those of you that POE'd prior to the closing of the sale of your house, what issues if any did you have not being in Canada for the closing? Did your lawyer handle it for you? Did you just have them fed-ex the documents for you to sign? Any advice?

Thanks!

I moved my furniture and left two days prior to closing. All I did was leave the keys with my lawyer and signed all necessary papers the day before I moved. I had no issues at all, the money from the sale showed up in my bank account before the end of the business day on the day of closing.

Edited July 29, 2011 by OBX