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You are here: Experts > Business > Corporate Law > Tax Law (Questions About Taxes) > Capital Gains on US RV Property
Expert: Glenn D Schnabel
Date: 10/10/2008
Subject: Capital Gains on US RV Property
Question
QUESTION: Hi there,
We are Canadian citizens that had purchased and sold a recreational property within a park. We had owned the tiny lot for less than one year when we decided to sell and purchase a different lot. This occurred in 2008. Can you please let us know if we have a responsiblility to fulfill with regards to paying the US Government a tax on the small profit made from the sale and which forms we'll need to acquire to so? Thank you for your help with this.
Vivianne
ANSWER: Vivanne,
Thank you for your question.
You would file a 2008 tax return as a non resident alien IRS form 1040NR
and report the gain on the sale of the lot as a short term capital gain.
You would report any dividends or interest you received in the US.
You will need to determine whether you meet the requirements for a 1040 as a resident alien or as a non resident alien on Form 1040 NR.
It is to your benefit to file a 1040NR or else your income from Canadian sources may be subject to reporting on the US tax return with credits taken for taxes paid to Canada on Form 1116 or as an itemized deduction.
Hope this is helpful.
---------- FOLLOW-UP ----------
QUESTION: Thanks for responding so quickly. One more question please? Would it be beneficial for the US Government to find that we purchased another property within the States? Would that have any bearing on receiving a little reprieve on the percentage expected to pay on the Capital Gain?
Answer
Vivianne,
Thank you for your follow up question.
1)Would it be beneficial for the US Government to find that we purchased another property within the States?
If it was structured correctly when you bought it and sold the old property, you could have a 1031 exchange. This would have deferred the
gain on sale of the property. The problem with 1031, is that it has strict rules to follow. Based upon what you stated, this property was not treated under the 1031 exchange rules. They can get very complicated. The attorney usually handles both transactions and they have to be of comparative value.
2)Would that have any bearing on receiving a little reprieve on the percentage expected to pay on the Capital Gain?
No. not in this situation.
Suggestion, next time you sell a capital asset, speak with someone concerning tax consequences. It may be worth your while.
Hope this is helpful
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