MFJ residents of Texas file 1040 US Citizens. Bought residence in Canada. Fixed it up and then decided to sell. Hired Canadian tax accountant & attorney to handle Canadian tax obligations.
Can I use loss on US 1040 tax return? Will have to convert Canadian to US $ and most likely have US carryforward. Where can I find more information ... pub? forms?
Sounds like a personal use asset since they lived in it.
Possibly an investment but you would need to research thoroughly.
And yes you need to use US dollars on US tax returns.
What was the Canadian tax treatment for this? I'm curious.
@sjrcpa Canada would have withheld tax on the proceeds, or the sellers might have done some paperwork before closing to show there was no gain. In either case a return would have to be filed, but since there was no other Canadian income, a loss would have no benefit, unlike on their 1040.
If this was going to be a traditional b&b, with guests in their own home, it would be mixed personal and business use. Or is that really a business? Forget Canada, what if they had done this in the city of Canadian, Texas (on the Canadian River)? Similar to the "renting to a roommate" situation, which I have managed to avoid for a couple decades. Was it really a loss on the real estate transaction, or from the start-up expenses for the business that never started? What do they have to show intent -- did they check on zoning and permit regulations? Maybe bought the property and then found out the intended use was illegal? Were they going to move to Canada, or was this just a way to offset some of the costs of their second home? Lots of facts and circumstances to consider.
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