American Selling Property in Victoria BC – Tax Issues

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Question

I live in XXXXXX, and still a Canadian passport holder, and am a permanent resident of the US.

My property on Galiano Island is listed by Sotheby’s, and the home has been for sale since last October.

We had an offer in February which in the end fell through. I’ve dropped the listing price to $800,000 and is it appraised for at least that.

We owe roughly $300,00 with a mortgage held by BMO on Salt Spring Island.

Of course I am wondering what will happen with the Canadian Capital Gains tax once the home is sold. We caught the home for $150,000 in the early 80’s, vacationed each year there for about 3 – 4 months, and sometimes rented it out. During the past 3 years we rented it for 10 months of the year.

I have kept records of the numerous upgrades to the home, but they are not all meticulous. The work was done over the past 30 years.

I have tax records and records of mortgage and insurance of course.

I have also explored this issue with a tile company located in North Vancouver. They did some work last fall for me, to make sure that I alone am on the title, since my husband passed away last summer. Otherwise, I have not signed on with anyone for legal help with the concerns I mentioned above.

If you could let me know your thoughts and opinions I would be grateful,

XXXXX

Answer

Hi XXXXX, thanks for the email. Let me try to outline your situation below:

  • If you rented the property in the past you were required to prepare Canadian tax returns, NR6 and NR4 forms. Did this happen?
  • Once you sell the property you’ll have 10 days to file for a clearance certificate from CRA e.g. form T2062 and T2062A if the property was rented
  • You’ll need to calculate your estimated gain on the property and subsequently pay 25% of this amount to CRA
  • Your lawyer will need to withhold 25% of the proceeds in trust until such time as the clearance certificate is obtained from CRA
  • Once you received the clearance certificate from CRA the lawyer can send the 25% of the gain calculated and send you the difference in the trust account
  • In the following year (2019 if the house sells in 2018) you’ll need to file a Canadian tax returns to report the gain on the property by April 30th
  • Any taxes owing for Canadian purposes can be a credit on your US tax returns
READ  Canadian Non-Resident Tax Guide

I hope that helps, please let me know if you have any more questions.

Regards

Phil

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