Selling our Florida home - What we have to do?

Winter 2011 CSANews Issue 81  |   Posted date : Dec 02, 2011.Back to list

Bird talk - Le Jaseur
Dear Bird Talk,

Re: Selling our Florida home We have owned a villa in Florida for 15 years (and we’re Medipac users for as long).

There has been some appreciation in value of the unit since we bought it. We now find that we are in a position to have to sell.

Could you please tell us what we have to do to sell and have the money returned to Canada, without the IRS taking a chunk? Maybe put it in “Bird Talk” for all the others who are, or will be, in the same boat.

It is our understanding that there is some tax agreement between Canada and the U.S. that allows us to be taxed here and not there. Is that true?

Donald McNeely
Kingston, ON

Response :
Ed: We asked CSA legal counsel Wallace Weylie to comment and the following is his reply.

" The U.S. IRS (Internal Revenue Service) rules are, when a Canadian sells real estate in the U.S., 10% of the sale price has to be sent to the IRS upon completion of the sale. This obligation is imposed on all persons involved in the sale – real estate agents, title company employees and the purchaser. This 10% is a withholding amount, not a tax.

The seller is required to file a tax return for the year of the sale, and a calculation is done to determine if there was a capital gain on the sale. If so, the tax is computed and, if the tax is less than the amount withheld, a refund is claimed. If no capital gain was made, then the whole amount withheld would be refunded. The rate of tax is 15% (or less) of the gain, depending on the circumstances of the seller.

There is an exception to the requirement for the withholding - if the sale price is less than $300,000 and the purchaser is intending to use the property as their home. That issue is complicated, and the purchaser must provide a written undertaking as to their intentions in that regard. Most purchasers do not want to go on the hook for that. The seller still has to file the tax return relating to the sale, in any event.

There is a tax treaty between Canada and the United States which specifically provides that each country can tax the proceeds of sales of property in their country (i.e. sales in the U.S. are taxed in the U.S.). "

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