Hi - I thought I would post this here in hopes that I can find an answer. Here is my situation:
I am a Canadian citizen, working in New York with TN-Visa status since October, 2008. When I left Canada, I was sure to renounce my health care, close my bank accounts, and divest of property, since I didn't want to be considered a Canadian resident for Canadian tax purposes. However, I neglected to close a brokerage account I had (and still have), since at the time I had taken huge losses on the stock in that account. This remains my only Canadian asset, other than my RRSP.
On my last Canadian tax filing in 2008, my accountant included a deemed disposition of those assets, resulting in huge capital losses.
I have never declared that account to the IRS, since there were no gains. I have not bought or sold anything from that account since 2006 (when I was still living in Canada). I recently realized that I may need to declare this account to the IRS under FATCA. Is that the case? If so, how do I do so?
Fast forward to now: the stock in that account has recovered very nicely, and I'm considering selling it. My concern, though, is that if I sell that stock, will the capital gains mean that I need to file a Canadian tax return? I would like to avoid this, since that would mean getting taxed in Canada on all my US earnings, which would be a larger tax hit than I take here in NY State. Or would I only have to report the gains in the USA?
I'm willing to pay someone for a consult if that is necessary. In an ideal world, I suppose that I'd pay capital gains on the profit from the sale in my IRS filing, and get rid of this account once and for all.
Thanks,
-D
Capital Gains in Canada; US Resident
Moderator: Mark T Serbinski CA CPA
The reason you filed deemed disposition of your investments is for the very reason that once you leave canada, those stocks are no longer taxable in canada.
What have you beedn doing about any dividennds from that stock. THAT would have been subject to falt Cdn NR tax, as wel las being reported in US.
Also, apart from FATCSA (which is reported on Form 8938), the account should also have been reported on FBAR along with your RRSP. I also assume you have been dutifully filing form 8891 for RRSP as welll?
Anyways, back to your stock.
Once you sell this stock, you will need to report the sale to IRS only. The procees are obvious: the sale price in USD on the day you sell.
The cost however may be a little more difficult to determine. IRS doesn't recognize the deemed disposition (which is this case is a good thing since it was lower than your actual cost basis, so you will actually get to count some losses twice), so you will need to come up with a cost basis from a historical USD point of view for each buy and dividend that you recieved over the years. add to this that you are not obliged to use an average cost basis like you are in canada, and you can choose FIFO, FILO, or any specific units of your stock to sell (if you are not selling it all) for selling this stock.
Note that if your deemed dispo had been a gian, there is a special procedure to have IRS recognize this, so that you never pay twice on the gains, but that doesn't apply to your case.
From a regulatory point of view, you should not have kept your Brokerage account, as your broker is unlikley to have been licensed to deal with you while in US (I suspect you did not mention that you are in US). the correct thing to do is to transfer the holdings to a US broker when moving to US.
So, before dealing with the sale of stock, you need to address the following:
1. Pyment of tax to CRA and IRS on any dividends
2. FBAR on all Cdn accounts you've had since 2008.
3. Form 8891 and deferral election on RRSPs since 2008.
4. Form 8939, if applicable, of your foreign assets, since 2012.
What have you beedn doing about any dividennds from that stock. THAT would have been subject to falt Cdn NR tax, as wel las being reported in US.
Also, apart from FATCSA (which is reported on Form 8938), the account should also have been reported on FBAR along with your RRSP. I also assume you have been dutifully filing form 8891 for RRSP as welll?
Anyways, back to your stock.
Once you sell this stock, you will need to report the sale to IRS only. The procees are obvious: the sale price in USD on the day you sell.
The cost however may be a little more difficult to determine. IRS doesn't recognize the deemed disposition (which is this case is a good thing since it was lower than your actual cost basis, so you will actually get to count some losses twice), so you will need to come up with a cost basis from a historical USD point of view for each buy and dividend that you recieved over the years. add to this that you are not obliged to use an average cost basis like you are in canada, and you can choose FIFO, FILO, or any specific units of your stock to sell (if you are not selling it all) for selling this stock.
Note that if your deemed dispo had been a gian, there is a special procedure to have IRS recognize this, so that you never pay twice on the gains, but that doesn't apply to your case.
From a regulatory point of view, you should not have kept your Brokerage account, as your broker is unlikley to have been licensed to deal with you while in US (I suspect you did not mention that you are in US). the correct thing to do is to transfer the holdings to a US broker when moving to US.
So, before dealing with the sale of stock, you need to address the following:
1. Pyment of tax to CRA and IRS on any dividends
2. FBAR on all Cdn accounts you've had since 2008.
3. Form 8891 and deferral election on RRSPs since 2008.
4. Form 8939, if applicable, of your foreign assets, since 2012.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
That is what we are discussing: But that procedure only applies to deemed dispositions that resulted in GAINS, not losses.
What did I say?:
Note that if your deemed dispo had been a gain, there is a special procedure to have IRS recognize this, so that you never pay twice on the gains, but that doesn't apply to your case.
What did I say?:
Note that if your deemed dispo had been a gain, there is a special procedure to have IRS recognize this, so that you never pay twice on the gains, but that doesn't apply to your case.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing