Dual Canadian/US citizen, living in Canada, employed by the Canadian branch of a US-based company. I have an employee stock plan account at ETrade, holding some shares of my employer (NASDAQ listed), acquired via ESPP and RSU plans. Thinking of selling current holdings.
Note: All of my current holdings were acquired since my move back from US to Canada. So the capital gains were incurred strictly which Canadian resident.
Question is, how will I report this sale on Canadian and US tax returns? I am presuming the company will send me the appropriate Canadian reporting forms, since although it is US stock I am a Canadian employee of the Canadian subsidiary. I have read that Canada and US calculate taxation on capital gains very differently. I know the US system from my time in the US (selling by lots, long and short term holdings), also that Canada makes no long/short distinction and works by average acquisition cost, not by the individual lot. So on the 1040, do I show the capital gain as it is calculated in Canada (including halving it?) or do I calculate it the US way?
Dual citizen living in Canada selling employee stock
Moderator: Mark T Serbinski CA CPA
Re: Dual citizen living in Canada selling employee stock
You calculate it the "US way". Some of this will also be considered wages, no doubt. The Cdn tax you pay on the gains will cover this on your 1040 using 1116, and the wages can be excluded using 2555. This is all Cdn-sourced, so no special treatment required in terms of treaty.
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Re: Dual citizen living in Canada selling employee stock
Thanks so much! That is what I had reasoned would be logical, but taxation doesn't always follow my ideas.
The part considered wages gets included in income at the time of purchase (ESPP) or vesting (RSUs), with a portion of the RSUs withheld to cover the income tax. This seems to work similarly in US and Canada, and it leaves one with a fairly small capital gain (or even a loss) at time of selling.
The ETrade account shows all the details needed for the US calculation, so I think this will be straightforward, just tedious. The obnoxious thing about these acquisitions is that you end up with many small lots to account for. A nice problem to have, of course. The last time I had to do this was as a US resident, and I could get TurboTax to download the 1099 details directly from ETrade. I suspect as a Canadian resident I won't get a 1099 and this procedure likely won't work. So at worst, a bunch of data entry.
The part considered wages gets included in income at the time of purchase (ESPP) or vesting (RSUs), with a portion of the RSUs withheld to cover the income tax. This seems to work similarly in US and Canada, and it leaves one with a fairly small capital gain (or even a loss) at time of selling.
The ETrade account shows all the details needed for the US calculation, so I think this will be straightforward, just tedious. The obnoxious thing about these acquisitions is that you end up with many small lots to account for. A nice problem to have, of course. The last time I had to do this was as a US resident, and I could get TurboTax to download the 1099 details directly from ETrade. I suspect as a Canadian resident I won't get a 1099 and this procedure likely won't work. So at worst, a bunch of data entry.