2555/1116/8891 for Canadian Citizen moved to U.S. on GC

andydc · Post by **andydc** » Sun Apr 06, 2008 2:41 pm

Great forum for Cross border tax issues and I can only wish I came to the forum earlier.

Here are my tax situation: (Sorry for the long post.)
I am a Canadian Citizen, got my green card June 2007 and moved the family down to states at the end of July. Broke all ties in Canada before the final move. The earned income in Canada and US are about the same (48 K) as I spent half time in each side. Wife has around 20K income in Canada but did not work in US. From what I read and understand, it is better off that we file jointly using 1040 in US taking the full year residency election at federal level and file part-year residency at the state level. I am using turbo-tax for US filing and UFile for Canadian filing.

I worked for the Canadian subsidary of a U.S. company while in Canada and had salary income in Canada, interest income and ESPP stock sell in Jan 2007, (for that I got a 1099B form when I was a Canadian resident.) I need some help on from 2555 and/or 1116 and 8891 on RRSP, any advices would be greatly appreciated:

1) for capital gain on ESPP stock sell, do I report it on Candian return or US return or both? if both, how do I claim FTC on US return?
2) can I use both 2555 (for exclusion of employment income) and 1116(for exclusion of interest/investment income)? or I can only choose one?
3) for RRSP, we moved it to TDW and changed address to US address. we didn't withdraw anything from RRSP in 2007. do we still need to report RRSP on our US return or file 8891 to defer tax?

nelsona · Post by **nelsona** » Sun Apr 06, 2008 7:22 pm

All previously answered. Happy browsing. see you in may

andydc · Post by **andydc** » Sun Apr 06, 2008 8:21 pm

nelsona, thanks a lot for the reply. After reading more, I did find answers to my questions 2) and 3) from previous posts. However I am still confused on question 1) in terms of reporting on my ESPP selling, for I was given a 1099B and 1042S while I sold my U.S. company stocks as a Canadian resident, I was wondering if I need to report this transaction in both Canadian and US returns. should I handle this as a normal stock transaction and report this on Canadian return and then use form 1116 for FTC on U.S. side? could you please shed some lights on this. Much appreciated.

nelsona · Post by **nelsona** » Mon Apr 07, 2008 5:56 am

There is nothing special about ypu ESPP. It is stock, purchased at xx cost.

Since you are filing a full year 1040, its sale reportable in US, along with any other stock sales you made in 2007. That is trh definition of full-year 1040.

andydc · Post by **andydc** » Mon Apr 07, 2008 1:02 pm

Let me clarify my concern on my ESPP sell. Please correct me if I am wrong...I assume 1099B is sent only to U. S. resident for stock transactions done in 2007. I am not sure why I received a 1099B for the ESPP, I was still in Canada when I made the sell. so I should report the capital gain associated with the transaction to CRA on Schedule 3. And I am concerned that IRS may not allow me to take the capital gain tax paid to CRA as a credit on Form 1116, for I was given a 1099B and I am taking full year residency election. and they may consider the transaction was done as a U.S. resident.

nelsona, am I over-analyzing this? do I need to clarify with the trasnfer agent handling the transaction or IRS before I file? please let me know. thanks again.

andydc · Post by **andydc** » Mon Apr 07, 2008 4:08 pm

I just called the transfer agent, they made a mistake and considered me as a U.S. resident on the sell of my ESPP shares. Have to deal with their tax department to fix this, donno when this can be done yet:(

nelsona · Post by **nelsona** » Mon Apr 07, 2008 5:30 pm

It doesn't matter what form you were sent. You were or were not resident on a particular date. Period.

This is like a Cdn bank sending you a T form insteaad of an NR form.

You determine what your tax should be.

andydc · Post by **andydc** » Tue Apr 08, 2008 8:17 am

thank you. that is what I am going to do.

andydc · Post by **andydc** » Sun Apr 13, 2008 4:35 pm

One more question on my stock sell in ESPP, if I report the capital gain to CRA and also had some net captial loss from previous years to offset the gain in Canadian return. Can I still claim a foreign tax credit (which I suppose have to pay if I don't have the previous capital losson) on form 1116? please advise, thanksl.