Sold a house in UK - tax implications
Oct 29th 2009, 2:38 pm
#16
Lost in BE Cyberspace
Joined: Aug 2005
Location: South of Calgary
Posts: 13,374
Re: Sold a house in UK - tax implications
Which bit wonky?
RESIDENCE PROVIDED FOR A DEPENDENT RELATIVE
In addition to the relief that may be due on disposal of your own residence, you may also be entitled to relief when you dispose of a residence which you have provided for a dependent relative.
But you cannot get relief for:
• any residence acquired after 5 April 1988, or
• any residence acquired before that date unless the conditions
for relief were met by that date.
The conditions for relief are:
• the dependent relative must occupy the dwelling-house rent
free and without any other consideration
• only one dependant's dwelling-house can qualify at any
one time
• a husband and wife or civil partners who are living together can
claim relief for only one such dwelling-house between them
• the dwelling-house must be the sole residence of the
dependent relative.
Who is a dependent relative?
Dependent relatives are:
• any relative of you or your spouse or civil partner who is
incapacitated by old age or infirmity from maintaining himself
or herself, or
• your own or your spouse's or civil partner's mother who,
whether or not incapacitated, is either widowed, or living apart
from her husband, or is a single woman in consequence of
dissolution or annulment of marriage.
All of those conditions apply to us.
RESIDENCE PROVIDED FOR A DEPENDENT RELATIVE
In addition to the relief that may be due on disposal of your own residence, you may also be entitled to relief when you dispose of a residence which you have provided for a dependent relative.
But you cannot get relief for:
• any residence acquired after 5 April 1988, or
• any residence acquired before that date unless the conditions
for relief were met by that date.
The conditions for relief are:
• the dependent relative must occupy the dwelling-house rent
free and without any other consideration
• only one dependant's dwelling-house can qualify at any
one time
• a husband and wife or civil partners who are living together can
claim relief for only one such dwelling-house between them
• the dwelling-house must be the sole residence of the
dependent relative.
Who is a dependent relative?
Dependent relatives are:
• any relative of you or your spouse or civil partner who is
incapacitated by old age or infirmity from maintaining himself
or herself, or
• your own or your spouse's or civil partner's mother who,
whether or not incapacitated, is either widowed, or living apart
from her husband, or is a single woman in consequence of
dissolution or annulment of marriage.
All of those conditions apply to us.
Oct 29th 2009, 2:55 pm
#17
Account Closed
Joined: Aug 2008
Posts: 7,284
Re: Sold a house in UK - tax implications
Oct 29th 2009, 3:34 pm
#18
Joined: Sep 2008
Posts: 12,830
Re: Sold a house in UK - tax implications
Which bit wonky?
RESIDENCE PROVIDED FOR A DEPENDENT RELATIVE
In addition to the relief that may be due on disposal of your own residence, you may also be entitled to relief when you dispose of a residence which you have provided for a dependent relative.
But you cannot get relief for:
• any residence acquired after 5 April 1988, or
• any residence acquired before that date unless the conditions
for relief were met by that date.
The conditions for relief are:
• the dependent relative must occupy the dwelling-house rent
free and without any other consideration
• only one dependant's dwelling-house can qualify at any
one time
• a husband and wife or civil partners who are living together can
claim relief for only one such dwelling-house between them
• the dwelling-house must be the sole residence of the
dependent relative.
Who is a dependent relative?
Dependent relatives are:
• any relative of you or your spouse or civil partner who is
incapacitated by old age or infirmity from maintaining himself
or herself, or
• your own or your spouse's or civil partner's mother who,
whether or not incapacitated, is either widowed, or living apart
from her husband, or is a single woman in consequence of
dissolution or annulment of marriage.
All of those conditions apply to us.
RESIDENCE PROVIDED FOR A DEPENDENT RELATIVE
In addition to the relief that may be due on disposal of your own residence, you may also be entitled to relief when you dispose of a residence which you have provided for a dependent relative.
But you cannot get relief for:
• any residence acquired after 5 April 1988, or
• any residence acquired before that date unless the conditions
for relief were met by that date.
The conditions for relief are:
• the dependent relative must occupy the dwelling-house rent
free and without any other consideration
• only one dependant's dwelling-house can qualify at any
one time
• a husband and wife or civil partners who are living together can
claim relief for only one such dwelling-house between them
• the dwelling-house must be the sole residence of the
dependent relative.
Who is a dependent relative?
Dependent relatives are:
• any relative of you or your spouse or civil partner who is
incapacitated by old age or infirmity from maintaining himself
or herself, or
• your own or your spouse's or civil partner's mother who,
whether or not incapacitated, is either widowed, or living apart
from her husband, or is a single woman in consequence of
dissolution or annulment of marriage.
All of those conditions apply to us.
With any disposal the burden is not on CRA to show you owe tax, if you get an assessment from CRA you have to prove you don't owe it. Get and keep adequate documentation for 7 years at least.This is how far back they can go if they think there has been a genuine mistake.
Any investment property valued at over $100,000 should be declared to CRA. The penalties for failing to do so are quite high.
Last edited by Aviator; Oct 29th 2009 at 3:36 pm.
Oct 29th 2009, 3:42 pm
#19
Account Closed
Joined: Aug 2008
Posts: 7,284
Re: Sold a house in UK - tax implications
They key here is 'you may also be entitled to relief'. A determination will be made by CRA at the time of disposal and you may have to prove your case. Any valuation at the time of landing is in CDN$ at the CRA rate from BOC, not an arbitrary bank rate.
With any disposal the burden is not on CRA to show you owe tax, if you get an assessment from CRA you have to prove you don't owe it. Get and keep adequate documentation for 7 years at least.This is how far back they can go if they think there has been a genuine mistake.
Any investment property valued at over $100,000 should be declared to CRA. The penalties for failing to do so are quite high.
With any disposal the burden is not on CRA to show you owe tax, if you get an assessment from CRA you have to prove you don't owe it. Get and keep adequate documentation for 7 years at least.This is how far back they can go if they think there has been a genuine mistake.
Any investment property valued at over $100,000 should be declared to CRA. The penalties for failing to do so are quite high.
Oct 29th 2009, 3:57 pm
#20
Joined: Sep 2008
Posts: 12,830
Re: Sold a house in UK - tax implications
They have not changed in the 15 years I have been here so don't count on it changing in the future, other than in the favour of CRA. It is academic for everyone until they sell. Getting and keeping documents to support you with CRA should not be left until you need them. If you cannot prove your case CRA say what you owe, you have to pay it!
Oct 29th 2009, 4:03 pm
#21
Account Closed
Joined: Aug 2008
Posts: 7,284
Re: Sold a house in UK - tax implications
They have not changed in the 15 years I have been here so don't count on it changing in the future, other than in the favour of CRA. It is academic for everyone until they sell. Getting and keeping documents to support you with CRA should not be left until you need them. If you cannot prove your case CRA say what you owe, you have to pay it!
Oct 29th 2009, 4:10 pm
#22
BE Enthusiast
Joined: Oct 2008
Posts: 422
Re: Sold a house in UK - tax implications
Almost Canadian, you said:
It appears that you are saying that deemed acquisition happens at the time of landing instead of at the point of becoming a tax resident.
It'd be nice if you were right because this would likely lower any tax I would have to pay when I sell my property in NZ so I chased some references down.
From the quotes below it seems clear that capital gains only start accruing when you become a tax resident and you only become a tax resident when you make Canada your regular home. There is nothing there about landing.
What have I missed?
From IT-451R Deemed Disposition and Acquisition on Ceasing to be or Becoming Resident in Canada
From IT-221R3 (Consolidated) Determination of an Individual's Residence Status
That is a little misleading. The value of the property at the point of landing, when compared to when the property is disposed of is relevant for calculating the capital gain obtained. That has nothing to do with tax resident status. Of course, one will only become liable for capital gains tax in Canada once one becomes a resident for tax purposes. All rather academic as there is an exemption for principal residence as you have stated.
It'd be nice if you were right because this would likely lower any tax I would have to pay when I sell my property in NZ so I chased some references down.
From the quotes below it seems clear that capital gains only start accruing when you become a tax resident and you only become a tax resident when you make Canada your regular home. There is nothing there about landing.
What have I missed?
From IT-451R Deemed Disposition and Acquisition on Ceasing to be or Becoming Resident in Canada
24. Subject to 25 below, a taxpayer who becomes a resident of Canada at any particular time in a taxation year is deemed under subsection 48(3) to have acquired at that time each property owned at a cost equal to fair market value at that time. Property that is "taxable Canadian property" as described in paragraph 115(1)(b), or deemed to be taxable Canadian property because of an election under paragraph 48(1)(c), is excepted from subsection 48(3).
2. The term "resident" is not defined in the Income Tax Act (the "Act"), however, the Courts have held "residence" to be "a matter of the degree to which a person in mind and fact settles into or maintains or centralizes his ordinary mode of living with its accessories in social relations, interests and conveniences at or in the place in question." In determining the residence status of an individual for purposes of the Act, it is also necessary to consider subsection 250(3) of the Act, which provides that, in the Act, a reference to a person "resident" in Canada includes a person who is "ordinarily resident" in Canada. The Courts have held that an individual is "ordinarily resident" in Canada for tax purposes if Canada is the place where the individual, in the settled routine of his or her life, regularly, normally or customarily lives. In making a determination of residence status, all of the relevant facts in each case must be considered, including residential ties with Canada and length of time, object, intention and continuity with respect to stays in Canada and abroad.
Oct 29th 2009, 7:09 pm
#23
Bring on the snow!
Joined: Jan 2006
Location: Chicago, IL
Posts: 1,420
Re: Sold a house in UK - tax implications
Almost Canadian, you said:
It appears that you are saying that deemed acquisition happens at the time of landing instead of at the point of becoming a tax resident.
It'd be nice if you were right because this would likely lower any tax I would have to pay when I sell my property in NZ so I chased some references down.
From the quotes below it seems clear that capital gains only start accruing when you become a tax resident and you only become a tax resident when you make Canada your regular home. There is nothing there about landing.
What have I missed?
From IT-451R Deemed Disposition and Acquisition on Ceasing to be or Becoming Resident in Canada
From IT-221R3 (Consolidated) Determination of an Individual's Residence Status
It appears that you are saying that deemed acquisition happens at the time of landing instead of at the point of becoming a tax resident.
It'd be nice if you were right because this would likely lower any tax I would have to pay when I sell my property in NZ so I chased some references down.
From the quotes below it seems clear that capital gains only start accruing when you become a tax resident and you only become a tax resident when you make Canada your regular home. There is nothing there about landing.
What have I missed?
From IT-451R Deemed Disposition and Acquisition on Ceasing to be or Becoming Resident in Canada
From IT-221R3 (Consolidated) Determination of an Individual's Residence Status
Oct 29th 2009, 7:36 pm
#24
Binned by Muderators
Joined: Jul 2007
Location: White Rock BC
Posts: 11,682
Re: Sold a house in UK - tax implications
Half of any capital gain is added to your taxable income for the year. Half of any capital loss is your allowable capital loss and this can be offset against any taxable capital gains this year, the last three years, or any time in the future.
Do I even need to tell CRA about it as I will realize less than $100,000 on my share of the sale?
If you have made a capital gain then you must report it on your income tax return. You do not HAVE to report a capital loss as there is no penalty for reporting too much income. If you don't report it and you make a capital gain some time in the future you will kick yourself.
Last edited by JonboyE; Oct 29th 2009 at 7:41 pm.
Oct 29th 2009, 8:19 pm
#25
Bring on the snow!
Joined: Jan 2006
Location: Chicago, IL
Posts: 1,420
Re: Sold a house in UK - tax implications
You acquired ownership of the house after you became tax resident in Canada? If so, did you pay your mother for your half? If so, your tax cost in Canada is the price you paid converted to Canadian dollars on the day you purchased it. If you did not pay your mother your tax cost is zero. Your proceeds of disposition is the selling price less selling costs divided by two (because you only owned half share of the house) converted to CAD at the date of the sale. If this is more than your tax cost you have a capital gain, if less then you have a capital loss.
Half of any capital gain is added to your taxable income for the year. Half of any capital loss is your allowable capital loss and this can be offset against any taxable capital gains this year, the last three years, or any time in the future.
If your half of the house was worth more than $100,000 at any time you owned it and you used it to earn income you should have been declaring this with your tax return, along with the income. There are some nasty penalties for failing to do this (up to $2,500 each year) so you should go see an accountant and ask them about making a voluntary disclosure.
If you have made a capital gain then you must report it on your income tax return. You do not HAVE to report a capital loss as there is no penalty for reporting too much income. If you don't report it and you make a capital gain some time in the future you will kick yourself.
Half of any capital gain is added to your taxable income for the year. Half of any capital loss is your allowable capital loss and this can be offset against any taxable capital gains this year, the last three years, or any time in the future.
If your half of the house was worth more than $100,000 at any time you owned it and you used it to earn income you should have been declaring this with your tax return, along with the income. There are some nasty penalties for failing to do this (up to $2,500 each year) so you should go see an accountant and ask them about making a voluntary disclosure.
If you have made a capital gain then you must report it on your income tax return. You do not HAVE to report a capital loss as there is no penalty for reporting too much income. If you don't report it and you make a capital gain some time in the future you will kick yourself.
Oct 29th 2009, 8:50 pm
#26
Binned by Muderators
Joined: Jul 2007
Location: White Rock BC
Posts: 11,682
Re: Sold a house in UK - tax implications
As an aside, if the property was taxable Canadian property then your tax cost would usually equal the deemed proceeds of disposition of the deceased person. However, for UK property and a UK resident testamentary trust the reference point is the date the property is transferred into your name.
Nov 2nd 2009, 6:47 pm
#27
Bring on the snow!
Joined: Jan 2006
Location: Chicago, IL
Posts: 1,420
Re: Sold a house in UK - tax implications
Thanks
