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I am planning on moving to the U.S. for a 5 year period using a non-immigrant visa. I have a primary residence in the NRC. Real-estate market is a bit slow this time of the year around the NRC and I am evaluating sell vs rent options and wanted to understand the tax implications.
If I rent my property now and if I sell it later, would I be double taxed both in the US and Canada? Would I be taxed only on the capital gains since renting or on the gross price? I bought my property in 2012 and USD to CAD conversion was good back then. For US tax purpose when there is a need to put the value of my house would I use the 2012 conversion rate or current conversion rate?
Thank you,
A.
I'm not sure where the NRC is located. So I will answer your question based on the assumption that the location is in Canada.
As a non-resident of Canada, if you rent out a rental property in Canada, you must remit a withholding tax equal to 25% of the gross monthly rents collected to the Canada Revenue Agency (CRA). You can recover this tax by filing a Section 216 Non-Resident Return with the CRA.
If you sell a Canadian rental property as a non-resident of Canada, then the buyer's lawyer must withhold a tax equal to 25% of the selling price. This tax can be recovered by filing an "Application for a Certificate of Compliance" with the CRA. In addition, a Section 116 Non-Resident Return must be filed with the CRA to report the sale.
When you move to the US, you should file an election with your US return to bump-up the cost basis of your Canadian assets to fair market value on the date of immigration. This way you will not be double taxed.