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Tax implications when gifting foreign property

Q: We are Canadian and we own a home in the Arizona and would like to give it to our daughter. What are the tax implications for us?

 

A: When giving properties to our children we have to keep two things in mind.

The first is that it is a deemed disposition as far as the American and Canadian tax authorities are concerned.  You are responsible for tax due on any gain since you bought it.

The second is that there is a maximum amount per year you can “gift” to someone before it incurs a tax liability to them.  So the person you are giving the property to may have to pay tax unless you gift it in annual increments below the “gift threshold”.

My advice is to contact your accountant in Canada.  They will know the Canadian side of it and usually they will know an accountant that is familiar with US tax law.  If not, contact an accountant in the U.S. too.

Good luck!  – Ralph

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