The proceeds are easy enough to determine based on the selling price and any selling costs, but the ACB can take a bit more work. You start with the acquisition cost, including closing costs, and add any renovations over the years. However, for someone who immigrates to Canada, the calculation is a bit different.
Capital gains when moving to Canada
When you move to Canada, your deferred capital gains on assets like real estate and stocks are ignored for Canadian tax purposes. It’s only the growth that occurs thereafter that the Canada Revenue Agency (CRA) can tax.
An immigrant to Canada is deemed to sell and immediately reacquire their capital assets on their date of entry to Canada. (Most tax-deferred pensions are excluded.) The value gets converted to Canadian dollars, based on the foreign exchange rate at the time. To do the conversion, the CRA suggests using the Bank of Canada exchange rate, but it also accepts a few other verifiable sources.
For a rental property, the value upon moving to Canada becomes your cost base for capital gains tax purposes here.
Earning, saving and spending in Canada: A guide for new immigrants
Fair market value of a property for tax purposes
A taxpayer is not required to use a professional valuation, Carl. You can use your own estimate or a valuation from a realtor. However, the CRA can challenge your valuation, and the onus would be on you to prove that yours is accurate.
When you file your tax return, you must “certify that the information given on this return and in any attached documents is correct, complete and fully discloses all of my income.” As a result, it may be advisable to use a professional appraiser to determine a fair market value in a case like this.
Historical valuation
If you didn’t obtain a valuation in the past, you can certainly do one after the fact.
A realtor or a professional appraiser should be able to look back at historic and comparable sales data around the time for which you need the property valuation.
