Hi there,
I'm seeking advice on a deemed disposition mess.
In 2008, my husband and I are Canadian residents and left Canada for the US and filed a Deemed Disposition (T1243) for all Canadian investments. Since this was the beginning of the financial crash, we had a small taxable capital loss that year of around $4000.
About a year later (2009), we returned to Canada. Here is where we made a mistake:
1. We did not realize the investments were now deemed acquired at the market value of the date we returned
2. We did not realize there was a time limit to when you could unwind your disposition
As such, when we now actually sell any of our investments, even if we make a loss, or small gain, it appears to CRA that we've made massive capital gains when you compare the value of present sale to the Fair Market Value on the date of return in 2009. The issue is because of the financial crisis, even though we’re having losses, CRA thinks we owe money on gains!
We finally spoke to one CRA agent who said we could pay a $100 fee per month for the time starting in April 2010 for the choice to unwind the deemed disposition ($3,700).
When we do this, unwind the deemed disposition, what is the Fair Market Value we report to the government? The value of the investments that we actually bought them for? And what happens to the loss that we reported in 2008?
Unwinding Deemed Diposition
Moderator: Mark T Serbinski CA CPA
Unwinding the deemed disposition is just that: it is as if it never happened.
As you know, if you return to Canada after making after having made a deemed disposition, you have the option to undo it, and you simply go on as if nothing had happened. Otherwise, you are deemed to have acquired those investments when you returned.
of course, you must still hold the same investments when you return.
You would in essence amend your departure return, removing any gains/losses on the investmebts you emect to "un-deem".
Without doing this, the losses you incurred while non-resident are -- quite rightly -- ignored by CRA. Had you made massive gains during your period of non-residency, they would have been -- again, quite rightly -- ignored as well.
I'm unaware of this $100/mo penalty for late filing of the unwind, but would consider myself lucky if they allow you, sinc there was a time limit.
As you know, if you return to Canada after making after having made a deemed disposition, you have the option to undo it, and you simply go on as if nothing had happened. Otherwise, you are deemed to have acquired those investments when you returned.
of course, you must still hold the same investments when you return.
You would in essence amend your departure return, removing any gains/losses on the investmebts you emect to "un-deem".
Without doing this, the losses you incurred while non-resident are -- quite rightly -- ignored by CRA. Had you made massive gains during your period of non-residency, they would have been -- again, quite rightly -- ignored as well.
I'm unaware of this $100/mo penalty for late filing of the unwind, but would consider myself lucky if they allow you, sinc there was a time limit.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best