TaxConnections

Login | TAXPAYERS | TAX PROFESSIONALS-START HERE

I am a Canadian citizen who moved to the US a few months ago. We were not able to sell our residence before we left, and we are selling now. If we had sold before we left Canada, the big capital gain on it would have been tax-free. By selling it now, I am told that I have to put-up 25% of the capital gain as security with the Canada Revenue Agency, to get a “clearance”, and the IRS will tax the gain because they consider my cost base to be the amount I paid when I bought it 12 years ago. Am I screwed?

Cross Border Tax
TaxConnections Members... Answer This Question Want To be One of Our Tax Experts? Register Here

Tax Professional Answers

User Photo
Michael Atlas, CPA, CA
No, you are not!
Selling it before you left would have been easier, because you would not have had to deal with CRA tax clearance requirements.
However, the gain should be tax-free in Canada under the “principal residence exemption”. The CRA has an administrative policy of allowing that exemption to be applied when you apply for a tax clearance, so you should not have to put-up any security with the CRA.
For US tax purposes, you should be able to use the fair market value when you left Canada as your cost base. This is done by filing your US tax return in accordance with Article XIII(6) of the Canada-US Tax Convention, which states:
“Where an individual (other than a citizen of the United States) who was a resident of Canada became a resident of the United States, in determining his liability to United States taxation in respect of any gain from the alienation of a principal residence in Canada owned by him at the time he ceased to be a resident of Canada, the adjusted basis of such property shall be no less than its fair market value at that time.”
Leave a Comment 205 weeks ago

Meet Leading Tax Advisors

User Photo Peter J. Scalise

Federal Tax Credits & Incentives Practice Leader

New York, NY

User Photo John L Stancil

Tax Advisor/CEO

Lakeland, FL

User Photo John R Dundon, II EA

Tax Director

Denver, CO

User Photo Kevin Johnson MS, JD, LL.M, CPA

Partner

Philadelphia, PA

User Photo Brian Weaver, CPA, MBA

Managing Tax Consultant

Des Plaines, IL

User Photo William Rogers, CFP, MBA, EA

Rancho Santa Fe, CA

Title

User Photo Clinton J Donnelly, LLM

International Tax Advisor

Panama City, Panama

User Photo Jim Marshall, EA

President/ Tax And Financial Advisor

Scottsdale, AZ

User Photo Brett A Thompson, JD, CPA

Managing Tax Lawyer

Katy, TX

User Photo Charles Woodson, EA

Tax Advisor/Fiduciary Coach

San Diego, CA

User Photo John Richardson

Tax Lawyer

Toronto, Canada

User Photo Clifford Benjamin

Senior Tax Principal

Daytona Beach, FL

User Photo Kazim Qasim, EA, CTC

Managing Tax Advisor/CEO

Orlando, FL

 

View/Select our Current List of Tax Topics

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Previous PageNext Page

INCREASE KNOWLEDGE WITH EVERY ISSUE OF TAXCONNECTIONS

 

Learn from tax advisors, straight to your inbox

Update My Email Address
Contact Us Today