Jingsamichty

Anyway, the numbers are just an example, it's the principle of the valuation/exchange rate and documented refurb costs being offset against CGT to make a capital loss, and therefore a rebate against income tax paid, that I'm really interested to know.

Novocastrian

You'd need to have kept all the receipts and not have done any renos on the black.

But you'd never do that, oh no.

Edit: thinking about it, I wonder if you'd need to use the exchange rates for the time(s) the improvements were done. Dunno.

JonboyE

FMV on emigration £350,000 @ 1.8 = $630,000

Original tax cost £300,000 @ 2.2 = $660,000
Additional cost £100,000 @ 1.8 = $180,000.

On paper a $210,000 capital loss. (50% allowable.)

Spending £100,000 to achieve a £50,000 increase in market value might cause someone to take notice.

Is the house in joint names with Mrs. Jingsamichty? If so, you would put half on your tax return. Did Mrs. Jingsamichty and children live in the house for some of this time?

Most importantly, you can only claim capital losses against capital gains this year or any of the three preceding years. If you haven't paid tax on capital gains then there is no refund to be had. (You can carry capital losses forward indefinitely but if you are leaving this is not much use.)

JonboyE

Yes.

Jingsamichty

Jonboy, the font of all tax knowledge, I thankee.

It was a largely hypothetical question, the UK housing market has of course meant that house prices have risen a lot more than my example- even in Norfolk, Novo! I was more curious to see whether the exchange rate fluctuation and refurb costs alone could negate a potential capital gain, and it would seem they can.

All irrelevant in my case as I have never paid any CGT so have nothing to offset a Capital Loss against anyway. Now, if you could offset it against Income Tax, I'd have been very interested...

Something for the OP to consider though, before she writes the cheque.

Novocastrian

Yea, that's the catch. A CG loss doesn't equate to a refund, just to an offset against other CGT.

Edit: But since we perhaps have Jon's attention at the moment, do I have any CGT exposure on my soon-to-be retirement home in France? I paid cash for it in 2008 and will be leaving Canada next year. I doubt it's increased in value at all, except for renovations we've done. But should I get it revalued before we leave? I was tax resident in Canada when we bought it, it's never been rented and I haven't reported it on T1135 because it is property for personal use.

JonboyE

If it is personal use property you are OK on the T1135 but yes, there is potential for a capital gain. I tend to be risk averse so if I was in your situation I would get an appraisal - even if it was just from a realtor rather than a qualified surveyor.

Novocastrian

Thanks Jon. And sorry for the late reply but we had dinner guests.

OK, but since qualified surveyors are not a French breed, I'll talk to M. Gosselin, the agent immobilier this summer.

99problems

Just a thought but exchange rate in 2002 was 2.25CAD$ to the pound and is now 1.85 so 40c lower. It would be possible to demonstrate an appreciation or gain in value of the asset but a loss when converted to CAD$ in whihc any CGT must be paid. Hence potetnially a refund would be owing as you have paid tax in CAD$ on rental income during that period. It seems to me you have been incredibly honest - I simply would not have declared income earned abroad - CRA isn't much brighter than HMRC.

R I C H

How much experience do you actually have of dealing with CRA? - You've been here less than 2 years.

I got audited within 3 months of arriving in Canada and starting a business here. CRA can be very thorough.

Novocastrian

Income taxes have nothing to do with capital gains taxes. It is perfectly possible to sustain a capital gain or loss simply on the exchange rates at deemed (or other) acquisition and deemed disposal. But if you have a capital loss you can only offset is against other capital gains (if any), but not against income.

Novocastrian

Quite. I think the poster may soon have 100problems.

99problems

CRA can't audit an asset held overseas. Grow up and get off your high horse.

I'm aware income taxes aren't related to CGT but the income derived from the asset was derived in UK currency so the argument is linear in demonstrating that any "gain" would also be in UK pounds so the conversion might incur a loss by itself. Next week I'll show you how to lace your shoes.

Novocastrian

You're a very pleasant person to have a chat with. While you're lacing your shoes the next time, take a moment to think about what currency fluctuations on income sourced abroad have to do with Capital Gains.

Obviously you need to report your worldwide income to the CRA, converted to Canadian dollars. Do not assume that CRA will not check out the source of that income.

Or, if you like, assume they won't. I don't GAF.

R I C H

You're naïve. CRA investigated where all my income was derived from, foreign assets, cash transferred to Canada, how I paid for the business assets etc etc. 3 days sat in my office, then 3 further months before I got my paperwork returned.

I hope you wear slip-ons.