Is USA's AMT credit transferable to Canada ?

maricami · Post by **maricami** » Thu Feb 24, 2005 1:01 pm

In 2004 I purchased several incentive stock options (ISO) in the company where I work in the US. This means that I will have to pay a good amount of AMT for 2004. Over the coming years, I will be able to claim most of this AMT back as a credit (probably a small amount every year). My question is: What will happen to the unclaimed credit if I decide to move back to Canada before I get the full AMT credit in the US ? Can I use this credit in Canada or is it lost ???

nelsona · Post by **nelsona** » Thu Feb 24, 2005 1:11 pm

It would be lost.

So would any unused capital losses or any other carryforward you migt have (foreign tax credit,etc).

Same in reverse, of course, canadian moving to US.

nelsona non grata

davidyulca · Post by **davidyulca** » Sun Feb 27, 2005 7:28 pm

Nelson,
Correct me if I am wrong. It is my understanding that when a Canadian moves to the U.S., files a departure return, has some unused RRSP carryforwards, tuition carryforwards (and probably some other such items), he will always retain these amounts until he eventually returns to Canada as a resident. When he resumes filing taxes in canada he can use them as such. Of course the time value of such things will decrease as time passes.

nelsona · Post by **nelsona** » Sun Feb 27, 2005 7:59 pm

No, you are correct. We both know this.

The question,however, asked if these could be transferred to another country's return, which seemed to imply that they wouldn't be returning to US any time soon, otherwise one would simply hold on to such carryforwards.

By the way, some of the credits may have 'expiry dates'.

But none are transferable cross-border.

nelsona non grata

maricami · Post by **maricami** » Tue Mar 01, 2005 7:44 pm

What will happen if the day I sell my stock I am a resident of Canada ? How will this work ? Will I pay taxes to the US, or Canada, or both ? If I pay to the US, will I be allowed the claim some AMT credit back ? I'm not quite sure how to handle this. Thanks.

nelsona · Post by **nelsona** » Tue Mar 01, 2005 8:03 pm

Since you are not a US citizen, any cap gain/loss will only be reportable ibn Canada, with basis determined the day you return to Canada -- This is by treaty and by Canada's deemed acquisition rules.

nelsona non grata

maricami · Post by **maricami** » Tue Mar 01, 2005 8:19 pm

Say I bought my stock at $10 and I move back to Canada when the stock is at $20. Do you mean that my basis in Canada will now be $20 ! What happens with the $10 of gain ? Do I have to pay taxes on it to the US when I move back to Canada ?

nelsona · Post by **nelsona** » Tue Mar 01, 2005 8:31 pm

No.

This is a loophole that is quite allowed for Cdn citizens returning to Canada from US.

It's well-known. I call it the Canadian Roth

On the other hand of course, if you buy at $20, and move to Canada when it is $10, your Cdn tax in future will be based on the $10 valuation not $20.

The mantra is sell your losers before leaving US and your winners after.

nelsona non grata

maricami · Post by **maricami** » Tue Mar 01, 2005 10:03 pm

What about this situation: Let's say I have more options in my company that are still available to me. When I'll quit my job (to move back to Canada), I will have 90 days to purchase them (or I lose them). What if I wait to be back in Canada to do a same day exercise-sell ??? If I was still in the US I would have to pay regular income on my gain because it is a disqualifying disposition, but what would happen now ? Would that also fall in that same loophole ?

nelsona · Post by **nelsona** » Tue Mar 01, 2005 10:18 pm

No.

This would not be capital income, and would thus be reported in both countries as straight income.

nelsona non grata