BirdTalk Dear Bird Talk, We own a house in Newport, VT, where we spend fewer than six months. We are planning other vacation time to be spent in other countries in 2019. What are the consequences in Québec? Michel Bérubé Sherbrooke, QC Ed.: Quebec allows a six-month absence in any calendar year. You would be able to spend the balance of your six months, not spent in Vermont, anywhere you like. They also have an unlimited number of 21-day trips which you can take outside of the province. This is over and above the basic six-month absence. CSA is hoping to get Quebec to increase the 21 days to 23 days, to be more convenient for members. Dear Bird Talk, I was reading your reply to a member from Ontario, who asked about capital gains tax. We own a home in Florida. Bought it for US$65,000 and are selling it for US$130,000. We were told that we could deduct improvements we made to our place, such as all new windows, new roof, newAC, new floors, new water heater, etc. We were also told that any capital gains under $250,000 did not need to be reported. This was from a U.S. real estate lawyer. I am curious to know your advice here. Love to read your column. Sharon & Donnie Ontario Ed.: Upon sale, U.S. capital gains tax (approximately 20% of the gain) is payable on the net gain. In calculating the net gain, the formula would be the sale price minus the purchase price, minus costs of purchase, minus costs of sale, and minus costs of your many improvements to the property. One does not necessarily have to have receipts, as the only time one would need these would be in the event of an audit. We believe that the U.S. real estate lawyer is incorrect. Dear Bird Talk, We purchased a condo in Florida four years ago and have made an approximate US$100,000 capital gain on it. But we are thinking of buying another property for about $315,000, thus not receiving any capital gain as we are rolling it all back into another unit. Do we still have to pay tax on the capital gain and, if not, how long must we live in the new unit before we do have to pay any capital gains tax. We are planning on going south for at least another five years, before we sell that one at a profit or loss? M. MacDonald Ontario Ed.: There is a procedure available in the U.S. to permit you to roll over the gain into the purchased property called a 1031 exchange. This will avoid the immediate payment of capital gains taxes. The rules are complicated − the funds from the sale have to be held by a third party, there are time limits involved and you will be taxable in Canada (unable to take the offsetting tax which you would have paid in the U.S.). But it can be done. Dear Bird Talk, I own a Florida condo. Do I need a U.S. will? Since only one’s last will is honoured, I would want it to be the same as the one I currently have. Must I bring my current will with me if I get another one in the U.S.? Could a Canadian lawyer prepare it or must it be prepared by a U.S. lawyer? Could I gift the condo to our three children? Would this incur taxes? Diana Young Kanata, ON Ed.: You do not need a U.S. will. There is a gift tax in the U.S., but not in Canada. If the property is left to the children in a will, there would be no tax in the U.S. But, again, the Canada Revenue Agency (CRA) will want any capital gains tax which may be payable. Dear Bird Talk, What, if any, are the reporting requirements in both Canada and the U.S. when we sell our personal use condo in Florida. Our primary residence is in Canada. We purchased the condo in 2012 for about US$87,000. While the condo has appreciated, the sale price would be less than US$200,000.The section in the CSATravel Information Guide on “Selling (Disposing) of Property in the United States” doesn’t address how or when to report a sale of this nature. Would our real estate agent or lawyer take care of any U.S. and CAD reporting and any relevant withholding taxes? The Canada Revenue Agency information is unclear on sale of personal use foreign property. CRA information seems limited to purchases, i.e. our property doesn’t need to be reported since it was purchased for under $100,000 and for personal use only. Garth McNaughton Napanee, ON Ed.: You will need to file a U.S. income tax return disclosing the sale of your personal use property in the year following the sale. Further, the capital gain will be subject to tax in the U.S. For U.S. tax purposes, a capital gain triggered on property held for longer than 12 months prior to its disposition is subject to preferential long-term U.S. capital gains tax rates (the maximum tax rate is 20%). You report the sale by filing IRS Form 1040NR, Schedule D and IRS FormW-7 (which will allow you to obtain a taxpayer identification number required to file the return). All of these forms can be filed at the same time. You will also need to disclose the sale on your Canadian return, but you may be able to use foreign tax credits to reduce or eliminate dual taxation. In our experience, the real estate agent and lawyer do not file on your behalf unless special arrangements have been made. You will need to make your own arrangements with an accountant familiar with the U.S. tax code. The $100,000 threshold which you reference has to do with an annual foreign property disclosure to Canada Revenue Agency (CRA). Personal use property is not subject to annual disclosure. However, you still need to disclose the sale of the property on your Canadian income tax return. 8 | www.snowbirds.org
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