US citizen in Canada - source of capital gains

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skobes
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Joined: Sat Mar 25, 2017 10:41 pm

US citizen in Canada - source of capital gains

Post by skobes » Thu Jan 10, 2019 6:31 pm

For a US citizen living in Canada, what determines the country source of capital gains for the purpose of foreign tax credits? If I sell shares of a US company through a Canadian brokerage, is that US-source gain or Canada-source gain? (Is the answer the same for US taxes and Canadian taxes?)

Thanks!

nelsona
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Re: US citizen in Canada - source of capital gains

Post by nelsona » Thu Jan 10, 2019 7:37 pm

All except real estate and natural resources are sourced in the country of residence.
You report on both returns, and take credit only on form 1116 on your US return.
Nelsona Non grata. Non pro. Search previous posts.

skobes
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Joined: Sat Mar 25, 2017 10:41 pm

Re: US citizen in Canada - source of capital gains

Post by skobes » Thu Jan 10, 2019 10:31 pm

Thanks. I just found the guidance in publication 514 that supports this. But it has an interesting exception:

"U.S. citizens and resident aliens with a foreign tax home will be treated as nonresidents for a sale of personal property only if an income tax of at least 10% of the gain on the sale is paid to a foreign country."

Suppose a sale has a large gain for US taxes but a smaller gain for Canadian taxes due to the deemed acquisition rule for new residents. As a result the Canadian tax owing on it is less than 10% of the gain for US taxes. Does it then become US-sourced (and eligible for Canadian FTC)?

nelsona
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Re: US citizen in Canada - source of capital gains

Post by nelsona » Thu Jan 10, 2019 11:28 pm

That is referring to personal property, not stocks.
Nelsona Non grata. Non pro. Search previous posts.

nelsona
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Re: US citizen in Canada - source of capital gains

Post by nelsona » Thu Jan 10, 2019 11:31 pm

The situation you describe simply means that the US will get its share of the pre-move gains, which is only fair.
Nelsona Non grata. Non pro. Search previous posts.

skobes
Posts: 6
Joined: Sat Mar 25, 2017 10:41 pm

Re: US citizen in Canada - source of capital gains

Post by skobes » Fri Jan 11, 2019 11:27 am

Ok makes sense. Thanks a lot :)

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