Temporary Contract in US

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blittle
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Joined: Wed Jul 13, 2016 10:14 am

Temporary Contract in US

Post by blittle »

I’m from Canada and just signed a one year contract to work in the US. I will be bringing my wife and child with me. We currently rent in Canada and the lease will be terminated when we leave. There is a chance that the US employer will renew my contract for another year, but there is no guarantee. We have every intention of returning to Canada if they do not renew the contract. Can we maintain our Canadian residency status while we are gone, or should we file exit returns?

If we can maintain our residency, what if my employer offers me another contract after the end of the first one year contract? Can I still maintain my residency for another year after that, or would I have to file an exit return at that point? In other words, is there a specific time period that I can be gone before Canada forces me to sever my residency? Many thanks.
nelsona
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Post by nelsona »

Given that you will have no primary residential ties in Canada (house and spouse), your departure date will be the date you move to US to work. you will be both by CRA regulations, and by treaty a Cdn non-resident and a US tax resident from that point onwards until you re-establish a Cdn home. Short of leaving your family behind, there isn't much chance of making a claim to be Cdn resident at that point.

While there may be some advantage to keeping Cdn residency (in your case, you can't really, because of no ties) plans change and it is difficult to back date your departure, or pick a nebulous date other than when you actually, physically, moved.

Since you will be living full-time in US and become a full-fledged US taxpayer the day you move regardless, all the issues surrounding foreign accounts and assets will be there anyways unless you get rid of a lot of them (TFSA, RESP, mutual funds outside of RRSP), so keeping Cdn residency for those reasons simply isn't worth it.
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blittle
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Joined: Wed Jul 13, 2016 10:14 am

Post by blittle »

Thanks.

Luckily we do not have a TFSA or RESP, but I do have a small stock portfolio that appears will be deemed to be sold on paper on my exit from Canada.

Someone told me that you can file an election in the year of your arrival to the US for stocks and your principal residence to limit future tax on the US side. Do you happen to know how I show this on my first US 1040 return?
nelsona
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Post by nelsona »

Yes, how about we come back to that when you decide what to do with your portfolio, which you will have to move to a US brokerage, btw. You might end up simply selling some or all of it.

FYI, it is IRS Rev Proc 2010-19:

http://www.garygauvin.com/WebDocs/IRS/rp-10-19.pdf
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
blittle
Posts: 7
Joined: Wed Jul 13, 2016 10:14 am

Post by blittle »

Thanks!

If possible I’m going to try and keep the shares after departure. Do you happen to know any US brokerage firms that will handle the stocks?

After reading the link you posted it appears that I complete the 8833 form under section 6114 and treaty article XIII7, but I have two questions.

1) What documentation do I need to provide to show the market value at departure and prove the tax was paid?

2) It says I must report the gain on the 1040. Would I just report this on schedule D and line 13 with an offsetting deduction somewhere else on the return to net it out to zero?
nelsona
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Post by nelsona »

You will include the deemed disposition form you attach to your Cdn departure return.

You will report the deemed sale on schedule d, but use the same cost basis as the sale proceeds, so the effect will be a zero gain sale. If you actually sell later in the same year, then you will only report that sale, with the new cost basis to determine the gain/loss

Like I said, we'll get into this at tax time if you wish. This will be the simpleset part of ypur taxes, and I stay away from mechanics in any event.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
blittle
Posts: 7
Joined: Wed Jul 13, 2016 10:14 am

Post by blittle »

Great, thanks for all your advice!
blittle
Posts: 7
Joined: Wed Jul 13, 2016 10:14 am

Post by blittle »

Do you know if it's possible to retroactively file this election or must it be filed in the year of arrival?

If I'm fairly certain that I'm only going to be staying in the US for one year, for simplicity, perhaps I won't bother with this; and if my situation changes unexpectedly I can always go back and file this if I end up staying longer.
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

Why would you be needing to retroactively file? You will be filing a 1040 at some point for either 2016 or 2017. Follow the Rev proc.
Remember this has nothing to do with your need to switch brokers. You ARE going to be a US resident and a Cdn non-resident.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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