Canadian Condo Sold

[David]

US citizen TPs were Canadian residents for the past 3 years and returned to the US in June 2015 with the same employer. They sold a condo they used as their primary residence in Canada for 3 years.

I know the US taxes citizens on world wide income and I don't think the gain exclusion is available for the TPs since they sold a Canadian residence. Is this correct?

So they will be taxed on the gain from the sale of their Canadian residence?

Thanks.

 

[Lee B]

David, you certainly have very interesting scenarios.

I will check later to see what the answer is .

[jklcpa]

5 hours ago, David said:

US citizen TPs were Canadian residents for the past 3 years and returned to the US in June 2015 with the same employer. They sold a condo they used as their primary residence in Canada for 3 years.

I know the US taxes citizens on world wide income and I don't think the gain exclusion is available for the TPs since they sold a Canadian residence. Is this correct?

So they will be taxed on the gain from the sale of their Canadian residence?

Thanks.

 

 

No exclusion of gain under sec 121. I believe that is allowed only on U.S. property.  Was there a mortgage on the property?

As I understand it, there are 2 potential taxable components to the reporting of the sale of foreign property. Because the functional currency for citizens and green card holders is the U.S. dollar, you will have the capital gain on the sale of the residence and the exchange rate gain from paying off the mortgage in the foreign currency.

You have to convert the purchase and any improvements or additions to basis using the exchange rate at the time each of these took place. Convert the sale price using the exchange rate at the time of sale to calculate gain. This gain, if any, is cap gain.  If a loss, it's personal and nondeductible.

Then if there was a mortgage on the property, the mortgage balance is calculated using the exchange rate at the time of purchase and recalculated again using the rate at the time of payoff.  The resulting gain from the change in rate, if any, is taxed as ordinary income.  Again, if a loss, it is nondeductible.

[Max W]

There is no prohibition on claiming Sec 121 for foreign property.

https://www.law.cornell.edu/uscode/text/26/121

It does exclude ex-patriots from claiming the exclusion. But, then these are people who have renounced their citizenship.

[David]

Yes, I get some very interesting scenarios.

Thanks for your help.