Jack wrote:

- quote -

I have little to say, other than you have to consider
Canadian taxes as well as US taxes. I'm fairly sure that,
even under the terms of the US-Canada treaty, they would owe
both US and Canadian taxes on the sale, although the
Canadian equivalent of the foreign tax credit might apply.

I'm also not sure there is no Canadian gift tax for real
property.

My wife is a dual US-Canadian citizen and a US resident, so
I've looked more at the provisions for avoiding
double-taxation of Canadian-source income, but Canadian real
property sold would be subject to tax in both countries,
subject to some offset provisions.

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jackyche[at]ureach.com (Jack) wrote:

- quote -

The sale of the vacation home is treated as effectively
connected income. As such, it goes on Schedule D. Assuming
that this is their only US source income, they only have to
complete Pages 1 and 2 of the 1040NR; Schedule A of the
1040NR where they can deduct the CA income taxes they will
have to pay on the gain; and Schedule D where they will
report the gain and compute the taxes in Part IV. As
Canadians they will get two personal exemptions to deduct
and they will also be entitled to dependency exemptions if
applicable. Thus, I don't see how any other scenario would
lower the tax bill on the sale.

As a side note, I would assume that if they both owned the
property, they would both have to file a US tax return
reporting one-half of the gain and one-half of the
deductions. They each would get one personal exemption. If
only one spouse owned the property, then that spouse would
file the tax return and claim an exemption for the other
spouse assuming that the other spouse did not have any US
income.

Alan
http://taxtopics.net

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My parents currently owns a vacation home in California.
They are non-resident aliens (in the US). Now they wish to
sell the house. The house also has appreciated considerably
since they first purchased it.

They have 2 options right now. First, they can sell the
house outright and pay the capital gains tax rate for
non-resident aliens. Anyone know what that percentage might
be?

Second, they can gift the house to me and I will sell it. I
understand that gift tax might come into play in this case
(although there is no gift tax law in Canada, where they
reside). I will sell the house and apply the capital gains
into my tax (I reside in the US) return at 15%. I believe
the Unified Credit does not apply in this case because it
only applies to residents and citizens of US.

Anyone care to comment on this scenario?

Jack

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