Deferred Tax Payment of Income from Deemed Disposition

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wmwilliam67
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Joined: Mon Oct 22, 2012 3:08 pm

Deferred Tax Payment of Income from Deemed Disposition

Post by wmwilliam67 » Thu Dec 13, 2018 5:08 pm

My wife and I moved to the U.S. from Canada and performed a Deemed Disposition on our stock portfolio. We transferred our stocks from Canada to a U.S. broker

We elected at that time to defer payment of tax on the income from the deemed disposition until we actually disposed of the stocks in the U.S (Form T1244)

Every year since leaving Canada, we have received from Canadian Revenue Agency a form asking if we have sold any stocks in the tax year. We have duly filled out the form and paid the taxes owed, if any, from stock sale for that year. About 3/4 of the stocks from Canada have now been sold in the U.S. and taxes paid to CRA. Some stock still remain however.

I have heard either in this forum or somewhere else that "something happens" at year 10 of this. I for the life of me cannot remember what that "something" is but it seemed important.

Does something happen in Year 10 or am I imagining things? We are approaching year 10 and hence the question.

I apologize in advance for the vagueness of the question. I searched this forum and Googled but found nothing.

wmwilliam67
Posts: 8
Joined: Mon Oct 22, 2012 3:08 pm

Re: Deferred Tax Payment of Income from Deemed Disposition

Post by wmwilliam67 » Thu Dec 13, 2018 5:16 pm

Basically, could it be that that at 10 years, the remaining tax becomes due?

nelsona
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Re: Deferred Tax Payment of Income from Deemed Disposition

Post by nelsona » Thu Dec 13, 2018 6:03 pm

Quite the opposite, if you did not sell the deemed disposed stocks, you are no longer taxable on the sales at all.
Nelsona Non grata. Non pro. Search previous posts.

wmwilliam67
Posts: 8
Joined: Mon Oct 22, 2012 3:08 pm

Re: Deferred Tax Payment of Income from Deemed Disposition

Post by wmwilliam67 » Thu Dec 13, 2018 6:13 pm

Thank you for the response.

I'm sure you're correct but it does seem to be too good to be true?

Would it be due to the fact that if CRA does not collect a tax 10 years after assessing it, it can no longer pursue the tax? That I
did read somewhere on the Internet.

nelsona
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Re: Deferred Tax Payment of Income from Deemed Disposition

Post by nelsona » Thu Dec 13, 2018 9:42 pm

It is a treaty issue, which essentially states that Canada and US can only tax its former residents for cap gains (that are not real property of business property located in that country) for 10 year after leaving.
It is Article XIIi(5).
Nelsona Non grata. Non pro. Search previous posts.

cnytax
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Re: Deferred Tax Payment of Income from Deemed Disposition

Post by cnytax » Thu Feb 14, 2019 2:36 pm

Thanks for the referring me to Article XIII(5) of the U.S. Canada tax treaty. It does seem quite clear that taxation can occur for only 10 years following departure.

My wife and I left Canada in 2007 for the U.S. , so the 10 year limit has been passed. However, CRA still sends us a form annually asking if we have
disposed of any stocks in the previous year. In previous years, we have duly reported any sales and have paid the tax as required.

Not sure what to do now if CRA keeps sending us the form. (The point is moot since our remaining stocks will probably never be sold anyway.)

Thanks.

wmwilliam67
Posts: 8
Joined: Mon Oct 22, 2012 3:08 pm

Re: Deferred Tax Payment of Income from Deemed Disposition

Post by wmwilliam67 » Sun Mar 10, 2019 3:31 pm

Is it possible the CRA is not aware of the 10 year rule?

nelsona
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Re: Deferred Tax Payment of Income from Deemed Disposition

Post by nelsona » Sun Mar 10, 2019 6:23 pm

No, but they sometimes need reminding.
Nelsona Non grata. Non pro. Search previous posts.

cnytax
Posts: 47
Joined: Sat Jul 16, 2011 11:28 am

Re: Deferred Tax Payment of Income from Deemed Disposition

Post by cnytax » Fri Mar 15, 2019 12:45 pm

Hi,

So today my wife received CRA Form RC171 asking if any stocks were sold during 2018. It is now 12 years since we left Canada so CRA is either unaware
or not concerned with Article XIII(5) of the U.S. tax treaty.

What should we do?

Send them a letter pointing out the Article XIII?

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