Cost basis for Married Filing Jointly first year

ael · Post by **ael** » Thu Apr 14, 2016 1:33 am

Hi,

I am filing Married Filing Jointly for my first year in the US. I bought stocks in Canada in 2014 and sold them in 2015 before arriving in the United States. I've seen in various posts that I can use the value of the stock on January 1, 2015 as the cost basis, but how do I justify this to the US government? The tax treaty article XIII(7) seems like it would be the best bet, but it doesn't work since there was no deemed disposition, and even if there were the deemed disposition would be too late. Thanks!

nelsona · Post by **nelsona** » Thu Apr 14, 2016 6:40 am

I've never seen such posts, and such a provision does not exist.

You simply report the same gain as you did on your Cdn return, and use the passive 1116 to get this back. This is how any US citizen living in Canada would report, which is essentially what you became when electing full-year 1040

Had this been a deemed disposition there is provision to use the deemed value as new cost basis (never the jan 1 date) That is what XIII(7) is for. And it would work for deemed dispos done during the year.

ael · Post by **ael** » Thu Apr 14, 2016 2:09 pm

Thanks Nelson. The gains were my only income in Canada in 2015, so I owed no Canadian taxes after credits, I can't claim anything on 1116 and I think I'm stuck paying taxes on the full gain to the US.

nelsona · Post by **nelsona** » Thu Apr 14, 2016 2:56 pm

... yes, or rethinking your decision to file jointly.

You could still file dual-status and not report the gains at all on your 1040 dual. It would be MFS of course for both of you.