Canadian Income Filing Requirement?

[WhiteOleander]

I have a client that sold gold held in Canada. I am trying to find out if she needs to file and pay Canadian tax.


Client sold gold which was held by Scotiabank in Canada. Client is a US resident and has not resided or filed a Canadian return in the past. Client received form T5008 which shows the proceeds $121326.00. Client has a cost basis of 36305 which is a capital gain on collectibles of 85021. Does she have a fling obligation to Canada? If so what is the due date and can she get an extension?

Any help appreciated.



Thanks

[Burke]

Can't tell you absolutely if she has to file. But I do know the due date is 4/30/14. They did not withhold anything? See the US/Canadian Tax Treaty Pub 597. Might give you some answers.
Will ask my Canadian guy and let you know.

[Burke]

Well, that was quick. His reply: "My best guess is No, if we are talking about gold bullion bought in Canada, then sold in Canada, but your client is not a resident of Canada. Generally, we get to tax capital gains on real estate only."

Then he refers to the section on Gains in the US/Canada Tax Treaty, which is too long to post here. But it seems to indicate it is only taxed in the US for a US resident. What a deal!

[WhiteOleander]

Thanks Guys. Hope the "Canadian" guy can confirm for me.

[mastertaxguy]

Canadien gold sales-fbar-foreign asset reporting

And you inquired if you client complied with the Foreign Asset reporting requiremens or if appliable, FBAR, yes?

[Burke]

Thanks Guys. Hope the "Canadian" guy can confirm for me.

This information is on the Canada Revenue Agency's website. Go to "Disposing of or Acquiring Certain Canadian Property," and go to page 7. Look under "What is Treaty-Protected Property?"
"Most tax treaties allow Canada to tax the income or gains only on Canadian real and resources properties and on shares of companies that derive most of their value from such properties. As a result, Canada is prevented from taxing other types of property that would normally be taxable under the Income Tax Act. ..." The US/Canada Tax Treaty itself refers to gains on the sale of real property, certain tangible personal property used in a business, and other business assets. Otherwise, it is not taxed to a non-resident of Canada.

[WhiteOleander]

Thanks so much Burke.

[Burke]

I wanted to add something to my previous post, for any future readers primarily. The fact that this is not taxable in Canada for a non-resident, in no way implies that it is not taxable on the US return of a citizen/resident here. In fact, the treaty was negotiated and approved on the premise that the reason it is not taxed in Canada, is that it IS taxed in the US. Thus, no foreign return need be filed and no reciprocating credit to take. In this particular case, it works to the TP's advantage because we have very favorable capital gains rates in the US.