U.S. Resident Selling Canadian Rental Property
Question
"I'm a U.S. resident holding Canadian rental property. If I sell it, would I be taxed differently being a Canadian living in the U.S. and do you pay capital tax on 50% of the profit? I am trying to get money together to buy an apartment building in the U.S."
Answer
If you sell the Canadian property, a capital gain must be reported on a Canadian non-resident return. Only 50% of the gain is taxable.
Form T2062A Request by a Non-Resident of Canada for a Certificate of Compliance Related to the Disposition of Canadian Resource and Timber Resource Property, Canadian Real Property (other than Capital Property) or Depreciable Taxable Canadian Property should be filed with Canada Revenue Agency well in advance of the sale, and an estimate of income tax owing on the capital gain must be remitted with the form. If this doesn't happen, the purchaser of the property is required to withhold 25% of the purchase price and remit it to CRA.
Canada Revenue Agency discusses the rules for non-residents disposing of taxable Canadian property here, and provides a pdf version of Form T2062A here.
South of the border, the gain must be converted to U.S. dollars and reported on your U.S. 1040 return. The gain will likely be higher, because you must reduce your cost basis by the depreciation that could have been claimed. There is also no 50% exemption in the United States. Rather, there is a flat tax of 15% on long-term gains, or assets held for more than a year. You could claim a foreign tax credit on your U.S. return for the tax paid to Canada, to eliminate the double taxation element.