Almost Canadian

None of those support what we have been discussing which is: if the initial receipt of the funds is reported to CRA (as I outlined above) and the funds are kept in the same currency, the use of the funds in the same currency does not trigger any form of capital gain irrespective of what has happened to the exchange rate since the date of initial receipt.

Of course, this requires you to keep a track of when you received the funds and the exchange rate on the date of receipt, if you do not wish to use the annual rate as another has suggested above but that is simply for income purposes and has nothing to do with capital gains.

Almost Canadian

Bullshit.

Using your example, you declare the $1,500 to CRA as income and, irrespective of what has happened with the exchange rate, you can spend the 1000 sterling in sterling however you wish to as you have already paid the relevant tax on it.

I accept that if, at a later date, you change the funds into another currency there may be a capital gain/loss but if it remains in the same currency, there is no gain/loss.

dgagitw

I think you’ll find you’re the one talking shit.

This is what our once resident tax expert thinks/thought:

http://britishexpats.com/forum/canada-56/capital-gains-foreign-currency-718432/#post9387875

Whether you spend the money in GBP or convert it to CAD first then spend it, the CRA treats that as a capital gain that must be reported.

And here’s the specific words from the CRA link that apply in the house rental case:

9. Where a taxpayer has a bank account in a foreign currency into which receipts from customers are deposited or on which cheques are drawn for the payment of foreign expenses or purchases, there may be, especially in the case where a taxpayer operates a foreign branch, numerous transactions on which a foreign exchange gain or loss will result. If the receipts in foreign currency are accumulated in the foreign bank account and converted periodically into Canadian dollars, there may be a foreign exchange gain or loss when each conversion is made. If the foreign funds are used to pay for purchases or to settle accounts payable, there may be, in respect of the funds so used, a foreign exchange gain or loss in the same amount as if those funds had been converted into Canadian dollars at that time and other Canadian dollars had been used to make the payment. When foreign exchange gains and losses are computed for such transactions any of the methods indicated above may be used.

BristolUK

That link concerns spending does it not? Regular payments for maintenance and insurance...on the foreign rental? Those are then rental expenses.

You also seem to be talking about a capital gain between money held when arriving in Canada and the value of that money after.

If you are resident in Canada and receiving money/profit/income from a foreign rental, that's not the same thing.

The link in that other thread also seems to be about something other than simply maintaining a rental property with ongoing income and expenses where expenditure regardless of exchange rate fluctuations is simply expenditure relating to the rental income and nothing more.

Almost Canadian

You are comparing apples with oranges and this is descending into what is outlined in my signature.

dgagitw

When you dispose of foreign property - whether that is currency or anything else - there is a capital gain or a capital loss whether you like it or not. Now, maybe most people at small scale ignore that and maybe CRA don’t care that much, but that doesn’t change the facts.

dgagitw

Nope, I’m comparing apples with apples and your signature is as full of crap as you are.

Aviator

You do not seem to clearly understanding the terms and concepts you are trying to express. Deemed disposition, ACB, CCA, all have specific applications in specific circumstances. CGT is triggered under certain circumstances and not others.

Earnings on money sitting in an account do not impact any ACB, earnings would be either income or CGT, depending on how they were earned and reported accordingly.

Income and Capital Gains are quite separate and taxed differently.


https://www.canada.ca/en/revenue-age...gain-loss.html

As entertaining as this thread is, anyone reading this thread should take professional advice before making financial decisions. Alternatively, CRA can be contacted in writing and asked for a written determination, they are the only authority on taxation.

Aviator

BristolUK

Yes, I'm aware of Capital gain and losses on selling any property other than your primary residence. I sold one a little over a year ago.

But you're talking about income and expenditure on a property that not only have you not disposed of, you don't even have it yet.

Steve_

The key word there is "income".

Look the whole thing with renting out property in a foreign country is a huge pain in the backside because of currency conversion, there's no question about it. The income has to be converted based on what you've just pointed out.

Capital gains is a different subject which is mainly what he's banging on about. You can get all kinds of capital gains and losses because of tax issues, it is a huge pain. You are technically crystalizing a capital gain if you spend the money that's what the CRA says here:

For tax purposes you could have crystalized a gain. When it comes to personal affairs the CRA doesn't really seem to care a fat lot, if you had a permanent establishment (such as an office) abroad and did this on a business basis then yes they're going to care. Which is one of the reasons businesses set up separate corporations in each country they operate in.

I don't see the CRA going after all the snowbirds for example who undoubtedly do this frequently.

Say you receive £100 in rent. At that time it's worth $170. You then use it later on to buy paint for the house, and at that time it's worth $200. You've obviously been able to buy $30 more paint due to the difference in the exchange rate thus you have crystalized a gain and that gain is technically subject to Canadian CGT. Of course it's still only £100 of paint and probably the same amount of paint, but for tax purposes, there's a gain.

IMX the CRA are really interested in US tax returns, so if you report rent on your 1040NR they really want that taxed in Canada and if you sell the house in the US then that is a reportable event (even if there is no capital gain in the US) and the CRA can see that return and there may be CGT in Canada.

That seems to be the extent of their enforcement efforts as far as private property abroad goes.

De minimus non curat lex

It gets much more dicey with equities.

Anyway if the OP is really worried about it, the solution is to put it into a corporation.

BristolUK

But then being able to get more paint means your maintenance cost was lower than it would otherwise be, which increases your profit, which increases your tax anyway.

They're going to want CGT in addition to more income tax resulting from the same transaction?