Any Canadians sell their DVC? Help!

[disneyfreak89]

We have sold our DVC contract, Disney has waived ROFR and now we're just waiting for the sale to close.

We found out on our own that non-US residents must pay a 15% FIRPTA tax and apparently can request a refund by filing a tax return.

So our questions are: If we don't care about a refund, can't we just pay the FIRPTA Tax without filing a US tax return? If we can't and have to apply for an ITIN number, they want us to submit original documents or certified copies of these documents from the issuing agency. How do you do that??? Also, did you have to claim this sale on your Canadian taxes and if so how?

We are overwhelmed. We sold to simplify after a health crisis and now we fear we would have been better off keeping the contract instead of going through all of this stressful red tape!

 

[mab2012]

We have sold our DVC contract, Disney has waived ROFR and now we're just waiting for the sale to close.

We found out on our own that non-US residents must pay a 15% FIRPTA tax and apparently can request a refund by filing a tax return.

So our questions are: If we don't care about a refund, can't we just pay the FIRPTA Tax without filing a US tax return? If we can't and have to apply for an ITIN number, they want us to submit original documents or certified copies of these documents from the issuing agency. How do you do that??? Also, did you have to claim this sale on your Canadian taxes and if so how?

We are overwhelmed. We sold to simplify after a health crisis and now we fear we would have been better off keeping the contract instead of going through all of this stressful red tape!

I haven't done it myself (and I am not a tax expert, so take this for what its worth), but my understanding is:

1. Yes, if you don't care about the refund, you can just eat the tax and you do not need to file. (Personally, unless it was a very large contract, I probably wouldn't think the refund was worth the hassle, nor putting myself on the IRA's radar with an ITIN).

2. Specifically which "original documents" do you need to submit? If they are sales documents, your sales broker should be able to help.

3. You should report the sale as a capital gain (or loss) on your Canadian tax return. If there is a gain (ie. you sold the property for more than it cost), you are required to report and pay tax on that gain. Capital gains in Canada are taxable as income on half the gain (eg. if you made $1000 on the transaction, you are taxed at your marginal rate on $500). If you do have Canadian taxes owing on the transaction, you should be able to claim US taxes paid through FIRPTA as a foreign tax credit against your Canadian claim. If the property was sold at a loss, I'm not sure you're required to report it on your Canadian tax return, but it is to your benefit to do so. The loss can be claimed against any other capital gain incurred in the current taxation year or preceding three years, or carried forward indefinitely to future years. Note that all transactions on your Canadian return must be reported in Canadian dollars, so if the CAD has dropped since you bought the property you may have a gain in CAD even if the USD price remained the same or dropped. For example, if you paid US $1000 when the Canadian dollar was at $1.10, and are selling now for US $1000 when the CAD is at $0.78, your CAD gain is ($1000 / 0.78 - $1000 / 1.1) ~= $373 on currency depreciation alone. If there is any significant amount involved here, it is probably worth speaking to a tax advisor to get complete and accurate advice.

Good luck!

 

[efrant]

I may be able to answer your second question:
1) If we don't care about a refund, can't we just pay the FIRPTA Tax without filing a US tax return? Answer: My understanding is that you are not really paying the tax per se, it is a withholding tax, so the buyer must withhold that amount. While I don't believe you need to file a U.S. tax return, I'm not sure.
2) If we can't and have to apply for an ITIN number, they want us to submit original documents or certified copies of these documents from the issuing agency. How do you do that??? Answer: I recently applied and received an ITIN, because I am expecting some U.S. royalty income, I needed to submit the form (W-7), along with a letter from the withholding agent, and either my passport or a certified copy. To get a certified copy, you need to take your passport to the passport office and they'll make a copy and send the copy and passport back to you (usually within 10-15 days).
3) Also, did you have to claim this sale on your Canadian taxes and if so how? Answer: Don't know.

 

[disneyfreak89]

Thank you for your replies!

We spoke to a local accountant and at first he implied we didn't have to really file especially if we didn't care about the tax refund, but he did say we were 'borderline' (meaning we made a profit albeit a small one) suggesting we could go either way, so we're going to go ahead and file through him just to play it safe. We don't want the IRS flagging us the next time we cross the border over something this insignificant!

My DH thought he read the passport office no longer certifies passports, but maybe that just means they can't do it there but can send it away? That is good to know, thanks.

The accountant said a lawyer/notary public can certify our original documents but I questioned him about that because it said it has to be done by the 'issuing agency', so he said he'd look into it.

Regarding claiming the US FIRPTA taxes on our Canadian tax return, we cannot do so unless we filed a US tax return apparently.

As for reporting it in Canadian dollars on our Canadian tax return, I sure hope the accountant has a list of exchange rates from years past because we have no idea what it was when we bought or sold it really.

 

[efrant]

Thank you for your replies!

We spoke to a local accountant and at first he implied we didn't have to really file especially if we didn't care about the tax refund, but he did say we were 'borderline' (meaning we made a profit albeit a small one) suggesting we could go either way, so we're going to go ahead and file through him just to play it safe. We don't want the IRS flagging us the next time we cross the border over something this insignificant!

My DH thought he read the passport office no longer certifies passports, but maybe that just means they can't do it there but can send it away? That is good to know, thanks.

The accountant said a lawyer/notary public can certify our original documents but I questioned him about that because it said it has to be done by the 'issuing agency', so he said he'd look into it.

Regarding claiming the US FIRPTA taxes on our Canadian tax return, we cannot do so unless we filed a US tax return apparently.

As for reporting it in Canadian dollars on our Canadian tax return, I sure hope the accountant has a list of exchange rates from years past because we have no idea what it was when we bought or sold it really.

The IRS won't accept a certified copy from a notary -- you need to go to the passport office to request it. Here is the request form (need to open it in Internet Explorer, as Chrome doesn't work for some reason) that you need to fill out and take to the passport office: http://www.cic.gc.ca/english/passport/forms/pdf/pptc516-eng.pdf

And here is the ITIN application page: https://www.irs.gov/individuals/individual-taxpayer-identification-number

 

[disneyfreak89]

The IRS won't accept a certified copy from a notary -- you need to go to the passport office to request it. Here is the request form (need to open it in Internet Explorer, as Chrome doesn't work for some reason) that you need to fill out and take to the passport office: http://www.cic.gc.ca/english/passport/forms/pdf/pptc516-eng.pdf

Wow! Thanks for that information and the link for the request form! We had no idea one existed!!!

 

[bankr63]

As for reporting it in Canadian dollars on our Canadian tax return, I sure hope the accountant has a list of exchange rates from years past because we have no idea what it was when we bought or sold it really.

The Bank of Canada has a historical database of noon/closing rates for the last 10 years. https://www.bankofcanada.ca/rates/exchange/legacy-noon-and-closing-rates/

 

[deedubb]

If you need to apply for an ITIN, I can put you in touch with someone in FL who can do it for you for $50. All you need to do is scan her a copy of your passport and do a very brief Skype interview. You don't need to certify the document.

 

[Canadian Girl]

Sounds complicated. I bought 116 DVD points with my adult daughter. I think we will just keep our points. We have a few more years to pay on our loans and selling would mean incurring a loss at resale prices anyway.

 

[disneyfreak89]

The Bank of Canada has a historical database of noon/closing rates for the last 10 years. https://www.bankofcanada.ca/rates/exchange/legacy-noon-and-closing-rates/

Good to know thanks!

If you need to apply for an ITIN, I can put you in touch with someone in FL who can do it for you for $50. All you need to do is scan her a copy of your passport and do a very brief Skype interview. You don't need to certify the document.

Thanks for the offer but the accountant we spoke to said he would apply for it when he sends in our tax form.

Sounds complicated. I bought 116 DVD points with my adult daughter. I think we will just keep our points. We have a few more years to pay on our loans and selling would mean incurring a loss at resale prices anyway.

I'd have to agree, as long as its not a financial hardship on you, its better to keep your contract. I will say if you set up a loan in the US, it might be cheaper to get a personal loan here and pay it off, then at least the interest here isn't in US funds.