JonboyE

I did search. Honest.

A quick question if anyone knows the answer. I sold some real estate in the US earlier this year. 10% was withheld. The total capital gain was less than $60,000 and I am resident in Canada for tax purposes. I want to claim a refund for the tax withheld.

In Canada you can use the previous year's tax forms in some circumstances e.g. for someone who dies in the first few months of the year.

Can I file a 2011 1040NR using the 2010 forms, or do I have to wait until the 2011 forms are published?

Michael

You haven't explained where you were living all these years when you had the house in the US. If you were living in the US for part of the year, you would probably have to file as a resident (form 1040). If you lived in US and the home a your primary residence and you lived in the home for 2 of the past 5 years, then you will likely have up to a $250,000 exemption ($500,000 if married and filing jointly) on capital gains.

If you were not living in the US during the time that you owned the home, you should have filed forms to exempt you from having taxes withheld and normally the escrow company can not withhold taxes when none will be owed. Without knowing you exact situation, it is hard to give advice and even then, this may be over my head.

However, you can not file your 2011 tax return before Jan 1, 2012.

JonboyE

Thanks Michael.

Steve_

I asked the IRS this very question the other day and spent two hours dicking around with them until I got the answer.

There is no withholding requirement assuming you've had it for awhile because the long-term capital gains tax rate in the US is currently 0% therefore the requirement for the US purchaser to file an 8288 does not currently apply, you simply provide the purchaser and the IRS with a statement to that effect, i.e. don't bother, the rate is 0%. You have to send the statement to the IRS at an address in Utah within 20 days of the transaction. I wasn't terribly clear on this point but the agent said if I was worried about it they could issue me a withholding certificate exempting the transaction from withholding on the basis the rate is 0%.

Nor is there a withholding requirement if the property is valued at less than $300,000 and the purchaser intends to use it as their principal residence for the next two years at least, so you can also rely on that provision if you don't want to bother with getting a withholding certificate, etc.

However, any real estate transaction is considered to be "effectively connected with a US trade or business" so you must file a 1040NR and a Schedule D at tax time, covered in zeroes.

More info in IRS publication 515, under "US Real Property Interest".