Spring Bird Talk Issues
Posted date : Aug 9, 2019.
There are two issues raised in the Bird Talk of the spring issue on page 8, where I am questioning your response.
1. There is no withholding tax on a U.S. sale of less than $250,000. To me, this means that I don’t need to submit a capital gains form to the U.S. IRS. If this were required, there would be withholding of any capital gain. The withholding tax is meant to force the taxpayer to submit a claim to get a partial refund. Seems that they are not concerned about anything less than $250,000. In fact, they have no social security number or tax identification number to verify that the appropriate capital gains form was submitted. So why should this form be submitted and how will they know if a capital gains form has been submitted or not? This seems to be the understanding in the U.S.
2. In Canada, we are required to report any real estate transaction of more than $100,000 at purchase. If the purchase price was less than this amount, what mechanism does the CRA have to force you to apply for capital gains? Again, as in the U.S. system, it seems that the CRA is not concerned about foreign capital gains on property purchased for less than $100,000. There is no T form showing this amount. So why report it?
In the first case, a U.S. tax lawyer said that there was no need to report sales of less than $250,000. In both cases, you disagree with what the Bird Talk persons understood to be the case. My question to you is, what is your knowledge and training and expertise to make such a statement? Do you have IRS and CRA documents to back up your position? When one person says one thing and another person something different, you are left wondering what the situation really is.
Thank you for your consideration of this matter.
Ed.: We have been researching and answering questions such as yours for more than 25 years. CSA also has a full-time research analyst (Evan Rachkovsky) and a dedicated legal counsel (Wallace Weylie), who is a licensed lawyer in both Florida and Ontario of whom we take advantage to assist in answering your questions. We have access to professional people in other provinces and in other states as well. Differing legal and accounting opinions are very common and are sometimes totally incorrect, occasionally even in writing. What we try to give you in Bird Talk is the most up-to-date information available. In answer to your two comments…
1. Both Canadian and U.S. tax systems are based on a self-reporting and honesty assumption.
2. ANY gain on a real estate sale is reportable and taxable in both Canada and the U.S.
3. The fact of any sale is reportable in the U.S. and Canada in the year following the sale, whether there was a gain or a loss.
4. In the U.S., there is a requirement to withhold 15% of the sale price and to send that amount to the IRS within 20 days of the closing. The one exception to this requirement is if the purchaser or a member of the family intends to occupy the premises for at least 50% of the occupied time over the two years following the closing, and the sale price is $300,000 or less. In this instance, no withholding is required. However, that does not change 1., 2. or 3. above.