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How do I handle capital gain for a Maui vacation home sold for a Canadian

maui doug
Level 1

I have a Canadian client who sold their Maui vacation condo and has the HARPTA/FIRPTA

tax of 22.5% withheld on their sale in escrow.  It was not a rental unit just used for the family

for a vacation home.  When I do the 1040 and Hawaii N-15 they have no income in

the United States thus they should pay $0 tax on the capital gain - correct?

They paid $175,000 in 2016 and sold in 2020 for $340,000 - I assume they are not 

entitled to the $250,000 capital gain exemption if they lived there 2 out of the past 5 years

since it is a vacation rental.  Any thoughts? Mahalo


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3 Replies 3
Level 15
Level 15
Theyve got 165k in gain, which is US income, why would they pay 0 in tax?

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Level 8

Research the treaty tax situation between the US and Canada to see what the options are.

Level 15

"if they lived there 2 out of the past 5 years"

You stated they live in Canada.

"since it is a vacation rental."

You stated it is not a Rental; a vacation home used solely by them? Are you trying to treat this as a second home?

"Level Up" is a gaming function, not a real life function.
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