Author Topic: 1. interest income; 2. joint tenants and capital gains tax  (Read 204 times)

Victoria

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1. interest income; 2. joint tenants and capital gains tax
« on: October 30, 2018, 10:57:21 PM »
I am a Canadian married to an American.  Because our professional work necessitated it, we resided in the US but we spent our summer vacations in Canada.  I understand that by virtue of residing less than 183 days per year in Canada, I am “deemed non-resident”.  Because our household’s only Canadian income was passive income—interest from our credit union checking & saving accounts—I did not file Canadian tax returns while I was living in the US.  This interest income was never more than $2000 annually and usually half that.  Of course we did report and pay taxes to the US Internal Revenue Service, including on the credit union interest income, and we filed the required FBAR (Foreign Bank and Assets Report) and Form 8938 (Statement of Specified Foreign Financial Assets).  Should I have also filed tax returns in Canada and if so is there a way to get compliant?  The CRA has never contacted me.

My husband and I owned, as joint tenants, property in Canada.  He died this past spring.  It was my understanding that as joint tenants of Canadian property, at the death of one of us, title to our property would pass to the other with capital gains tax deferred until the second of us died.  But when I applied to have the title of our Canadian property transferred into my name, I was given the horrifying news that, because we were living in the US when my husband died, I owe a tremendous amount of capital gains tax to both BC and the Canadian federal government, which, if we had been residing in Canada at the time of his death, would have been deferred. Please clarify the capital gains tax law re joint tenancy for the unsuspecting? And the rates of taxation.

Phil Hogan, CPA, CA, CPA (Colorado)

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Re: 1. interest income; 2. joint tenants and capital gains tax
« Reply #1 on: November 04, 2018, 07:48:11 PM »
Hi Victoria

Thanks for the post. First, being considered a deemed non-resident of Canada is not as simple as spending less than 183 days in Canada. CRA would want to review your total ties to the country before making that determination.

You are correct about the interest income. If this is the only Canadian income you received and you were not considered a resident of Canada (based on ties and subject to treaty provisions) you would not be required to file a Canadian tax return.

I'm sorry to hear about your husband. Unfortunately this is correct. Based on some comments by CRA the transfer would not be considered tax free if the taxpayers were not residents of Canada at the time of death.

https://taxinterpretations.com/cra/severed-letters/2013-0493911e5

Although you'll need to pay tax on his half of the capital gain, you'll get an increase in cost basis for the property so when you sell the gain will be reduced by this amount.

Hope that help and please let me know if you have any further questions.

Regards

Phil
Phil Hogan, CPA, CA, CPA (Colorado)
250-381-2400
Hutcheson.ca
phil@hutcheson.ca
* The information contained in these posts should not be construed as professional advice and is for informational purposes onl