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Cross Border Tax Reporting for a legal settlement for a rental property located in Canada
A Property Ownership Civil Lawsuit in Canada - My wife and I are US residents/citizens and file joint tax returns using TurboTax (desktop versions). We were the plaintiffs in a civil lawsuit in Ontario Canada, to evict the defendants who were renting our townhouse. In addition to the rent, the defendants owed us monies for fund we loaned to them over a decade. In lieu of the payment of the owed debt amount, the defendants transferred the title of the townhouse (purchased by them using the funds we had loaned to them) seven to us seven years ago. They also agreed to pay monthly rent. They never paid any rent. A couple of year later, when we served an eviction notice, the defendants claimed, that they paid for the property with their own funds and we were holding it in trust for them. They also claimed that they we didn’t loan them any funds.
The Settlement – After several years of delays and adjournments, a settlement was reached last year to end the civil lawsuit. The main terms of the settlement agreement are:
- The settlement agreement called for us to be paid a sum of money, say $P CAD for
- Any and all amounts owed to us, say $D CAD
- Any and all costs and expenses incurred by us after the settlement since the start of the dispute. We incurred the litigation Cost (say $L CAD) and the carrying cost for the townhouse (say $C CAD) prior to the settlement.
- The settlement also required the opposing party to reimburse us any and all carrying costs (say, $N CAD) related to the townhouse since the date of the settlement. Therefore, the final payment to us was $P CAD + $N CAD.
- We also incurred additional legal cost (say $LL CAD) after the settlement to enforcement the settlement agreement.
- Upon receipt of the Settlement Funds in their entirety ($P CAD+ $N CAD) this year, we transferred the title to the townhouse to the opposing party.
My specific questions are:
- Since the property title was transferred to us in 2017 for the owned amount $D CAD, is it ok to take $D as the purchase price of the property in our non-resident Canadian tax filings and the equivalent converted amount in USD in our US tax filings?
- Is it ok to take the settlement amount $P CAD minus the pre settlement carrying cost $C CAD as the sale price in Canadian tax returns and the equivalent converted amount in USA in our US tax returns?
- Is it ok to take our total litigation cost $L CAD + $LL CAD as the cost of selling in our non-resident Canadian tax filings and equivalent converted amount in the USD in our US tax filings?
- Since the sum of $D + $C + $L (also $D + $C + $L + $LL) far exceeds $P, we will incur a significant capital loss. Is the loss in our US tax filings computed by converting purchase and sale prices and selling cost into USD (as above) or by converting the capital loss in CAD in our Canadian tax returns to USD?
- Does TurboTax Canada provide full or expert assisted service to file taxes for non-residents for this situation in Canada and does TurboTax USA provide full or expert assisted service to handle the tax filings in the US? If so, how can I utilize these services.
I am sorry for the long questions. I look forward to your guidance and responses to my above questions. Thank you so very much for your time.