As you are likely aware, Canada and the US tax gains on sale of real property differently. Under the Canadian Income Tax Act (ITA) fifty percent (50%) of the gain is subject to tax at your individual rate. Under the US Internal Revenue Code (IRC) all of the gain is subject to a minimum of 20% income tax.
At death, under the ITA, Canadians are income taxed on 50% of the gain under the ITA. Under the IRC, no gain is income taxed. If you are a non-resident of the US and not a Canadian, at the date of death, the full value of the property, less an allocated amount of mortgage and allocated administration expenses, may be subject to US Estate taxes. Canadian’s are given liberal protections under the Canadian and US Tax Treaty.
Do not forget currency exchange rates between Canada and US that affect your gain.
In this regard, we help clients plan how to bring money to the US, and how to take title to real property to minimize taxes on gains when sold and or caused at death. Our planning not only involves the Canadian and US Tax Treaty, but also exceptions carved out in the IRC to cause extra savings on US taxes for any gains experienced. Married couples can especially benefit from elections under the IRC.