CAPITAL GAIN & AMERICANS

Not sure if this March qualifies as in like a Lion or a lamb, I guess we will see.

As if it is needed, a bit more texture to the discussion about non-Canadians buying land in Canada.

CAPITAL GAINS AND AMERICANS

We have spent time in the past years on capital gains tax. It is a big part of people’s housing decisions and governments are always circling around this issue and making modifications and adjustments. One thing that has remained sacrosanct (for now) has always been the exemption from capital gains tax on the sale of one’s principal residence. This law protects people who sell their home and want to use the money to retire, buy a new home or whatever, in that they will get all the equity from the sale of their home and not have to pay tax on the gain. This law does not completely apply to Americans who live in Canada, even for extended periods, own a place and ultimately sell their house. Our American clients who do this have a principal residence exemption but for them, they have a limit of $250,000.00 total capital gains exemption (assuming they owned the house for at least a year). After this $250,000.00 gain, the proceeds of sale are taxed at the rate of 24% (different formula but ultimately close to the standard Canadian capital gains tax rate). Often, these American folks are married to or life-partnered with, a Canadian. This may open some creative ways of transferring ownership to avoid any tax. Ancillary benefits may include the fact that inter spousal transfers do not generally attract land transfer tax either. All of this of course is in the shadow of the new federal law prohibiting purchases for non-Canadians for most of the country, so you will be dealing with longer term owners. Plenty of rules out there, if you have an American owner who is selling, more investigation is in order.

Gord

**as always, every situation is different and laws can change, if you have doubts, call someone