Selling Property in Russia and bringing Proceeds to Canada

[Boethius]

Svetlana, to avoid any problems in the future, I suggest you have the property evaluated before you leave Russia. 

docetae, if your wife actually gives the apartment to her parents, with "no strings" attached (i.e. they don't have to give the sale proceeds to her), the later transfer of money to your wife will not attract any tax.  It is viewed as a gift.  That may be a route Svetlana could take as well.

[Lily]

  It is viewed as a gift.  

One little correction: it will not be automatically viewed as gift, but the people should declare the money as a gift.

Having your property evaluated should help in case the Canadian resident will have to pay taxes on his or her foreign income, in this case - on foreign real estate. The resident will then have to pay the taxes on the amount that exceeds the figure of evaluation.

[docetae]

One little correction: it will not be automatically viewed as gift, but the people should declare the money as a gift.

Having your property evaluated should help in case the Canadian resident will have to pay taxes on his or her foreign income, in this case - on foreign real estate. The resident will then have to pay the taxes on the amount that exceeds the figure of evaluation.

So if the evaluation is correctly done, you can sell it with a loss and deduct it from your revenue ?

[Boethius]

One little correction: it will not be automatically viewed as gift, but the people should declare the money as a gift.

I disagree, Lily.  There is no requirement to have it declared as a gift for Canadian tax purposes.  In Canadian tax law, form matters.  

Having your property evaluated should help in case the Canadian resident will have to pay taxes on his or her foreign income, in this case - on foreign real estate. The resident will then have to pay the taxes on the amount that exceeds the figure of evaluation.

True, although all expenses related to selling the property (the evaluation, legal fees, bank transfer fees to get the money into Canada) will be added to the original cost of the property.  This amount is called the "adjusted cost base".

So if the evaluation is correctly done, you can sell it with a loss and deduct it from your revenue ?

I know you are joking.  However, I'll answer in any event. The gain/loss from the disposition of Russian situs property will, in these types of cases, be a capital gain.  So, if there is a loss on the disposition of property, it will be a capital loss.  Capital losses can only be applied against capital gains, and not against income sources.

[Misha]

That's why we are not going to sell it right away either, but wait till "the better times" and try to rent it so far too (when I finally leave).

Of course, renting an apartment in Russia from Canada entails another set of problems. You will need somebody in Russia to collect the rent and keep an eye on things. This will also mean repairs if something is broken and finding new tenants whenever your old ones leave....

[Lily]

I disagree, Lily.  There is no requirement to have it declared as a gift for Canadian tax purposes.  In Canadian tax law, form matters.  
 

Of course this is not a requirement. The income should be taxable.

However, if one declared the sent amount of money to Canadian as a gift from sender, this gift is not subject to taxation. Exactly because the form matters

[Boethius]

I'm not really certain what you are trying to say, Lily.

A gift of cash by parents to a child over 18 years of age is not subject to taxation in Canada.  The form in which something is given is important in Canadian tax law.  If this is truly a gift, no tax.  If this is a trust arrangement (i.e. the parents held and sold the property on behalf of the daughter), there will be tax on the cash transferred.

[Svetlana]

Hello, everybody! Lots of useful information already! Thanks! 
Benoit, we are studying the same things now!  I am also writing to banks trying to find out their commission for transferring the money to Canada! So, let us keep each other informed on our research results!  I will try to get another visitor's visa to Canada for this coming Christmas... but... you know how difficult it is to guess whether I'll "be given this privilege" or not!  please, keep fingers crossed for us!  If I am in Canada, we should definitely meet again!  By the way, tell Anna hello from me, please. And... no wonder you can't make her post here! It took my hubby more than a year to make me post here.  I agreed this time only because the issue is real important. I prefer to be a reader and observer! 
Back to the topic. I am not giving my apartment to my dad, but just today I signed the Warrant which says he has all the rights for it (including renting, selling, etc). So, he'll be able to sell it and send us the money when I am in Canada.
Guys, so far my husband and I decided to do the following. Please, correct us if you see any "doubtful" moments.
1) I will do the evaluation of my apartment before I leave Russia. (FYI the price stated there will be lower than its market price, according to their standards.  )
2) I will declare this Evaluation Paper when entering Canada with my permanent resident visa. Even though I don't have to (according to the customs rules, one doesn't have to declare residence property or if the property costs less than 100.000$ And my humble den definitely costs less). But this declaration will give me the proof later that I owned this property before entering Canada and I won't have to pay the tax on it (because it was my residence and because I declared it too, just to be on the safe side).
3) My dad will sell the apartment when the time is right and transfer us the money. (I haven't found the cheapest way yet)
4) Theoretically, I will have to pay the tax for the difference in cost stated in the Evaluation paper and the real one for the moment of selling. And there will be the difference, because the market changes and who knows how much my apartment will cost in a year or so. Plus, as I mentioned, they state a much smaller price in the official Evaluation Paper.
5) To avoid this tax, we could declare the money which coincides with the sum in the old Evaluation paper as the money got after selling the apartment, and the rest of the sum could be declared as my dad's gift to me!? Which means I don't have to pay tax again.. (tell me, if I am wrong!)

My only concern here is what if "They" won't be satisfied with my old Evaluation paper and will ask for an apartment sale contract to see the sum?? Plus I am wondering what kind of paper my dad will have to write "proving" it is his gift?
Oh, well... My poor girl's head is swinging of all these legal and financial issues!  I am sorry, if my English is not perfect in these messages, talking about love is easier, than about law! 
Thanks a lot to everybody again! 

[Boethius]

1) I will do the evaluation of my apartment before I leave Russia. (FYI the price stated there will be lower than its market price, according to their standards.   )
2) I will declare this Evaluation Paper when entering Canada with my permanent resident visa. Even though I don't have to (according to the customs rules, one doesn't have to declare residence property or if the property costs less than 100.000$ And my humble den definitely costs less). But this declaration will give me the proof later that I owned this property before entering Canada and I won't have to pay the tax on it (because it was my residence and because I declared it too, just to be on the safe side).

I wouldn't get the apartment evaluated if the valuation is less than its current fair market value.  Just state the current fair market value in your declaration, including any costs you have incurred (such as the warrant for your father) to make it saleable.  You want the value to be high for this property, but it should be the "real" value.

To avoid this tax, we could declare the money which coincides with the sum in the old Evaluation paper as the money got after selling the apartment, and the rest of the sum could be declared as my dad's gift to me!? Which means I don't have to pay tax again.. (tell me, if I am wrong!)

No, if your father doesn't own the property, he can't gift part of the proceeds to you.

My only concern here is what if "They" won't be satisfied with my old Evaluation paper and will ask for an apartment sale contract to see the sum?? Plus I am wondering what kind of paper my dad will have to write "proving" it is his gift?

If you state the value when you arrive, it is unlikely CRA will challenge that value on a future sale.

[Svetlana]

thanks, Boethius, but how can I declare the market value of my property to the customs without showing any paper to prove it?? I was told it is necessary?
As for my dad's gift... I could declare the money stated in the Evaluation as the profit got after selling the apartment. And all the rest could be stated as "just an additional money gift of my daddy for my happy life in Canada, for my birthday, for example"  in other words, I won't declare this gift as the money got after selling the property. My concern though is whether the actual sales contract will be asked (where the real price will be stated) or will my "old" evaluation paper be enough?
ohhh... I've been thinking so much about it and different variants lately that it all sounds nonsense to myself already 

[Boethius]

Sorry, Svetlana, I didn't see your post.  You shouldn't have to prove the value of your property.  Just list what you believe is the fair market value.  The reason is so that when you sell the property, you will have some verification of the value you attrributed to the property when you first entered Canada (and when it first became subjed to Canadian taxation).