Return to Canada - US Investment Disposition

[chelavnzuo]

Hi, I’m a Canadian citizen working in the US on TN visa, currently a non-resident for tax purpose in Canada, but plan to move back to Canada in the near future (possibly next year).

I have a regular stock investment account with TD Ameritrade in the US and would like to know what might be a good way to handle gains and losses.

1.For investment with gains, is the best practice to wait and sell them until I completely move back to Canada, so that the realized gain will be minimized (i.e. only be the price difference between the Canadian entry date and sell date in Canada)?

2.For investment with gains, do they must be sold in Canada? or can they be simply in-kind transferred to a Canadian brokerage account? What’s the pros and cons of doing so?

3.What should I plan ahead to make sure that IRS won’t come after me for the US investment gains that are realized in Canada right after I move back?

4.For investment with losses, is the best practice to simply sell them in the US right before I move back to Canada?

Many thanks!

[nelsona]

1. You are correct that your "winners" should not be sold until you are no longer taxable in US (which would likely be in the year AFTER moving).

2. You do not have to sell these, although mutual funds will have to be sold as they cannot be transferred to Canada, but ordinary investments can be transferred to a Cdn brokerage without problems and you can continue to hold these.

3. By delaying till the year after your departure, you will have no worries. The treaty is clear on who gets to tax gains: only the country of residence.


4. Yes, this is the only way the losses incurred while in US can be effectively used. you might balance these out with some winners so as not to exceed the amount you can claim each year for losses.

[chelavnzuo]

Thanks nelson, your insight is much appreciated! I have 2 quick follow-up questions.

What is the definition of “no longer taxable in US”? For example if I leave anytime in 2020, should I always have to wait until Jan 1st 2021 to sell the “winners”? or it can be done 1 day after I enter Canada? or 183 days after?

When investment is in-kind transferred to a Canadian brokerage, will the brokerage firm automatically update the “acquisition date” to reflect the entry day to Canada, or I need to adjust it by myself in say Turbo Tax during the next tax season?

Many thanks again!

[nelsona]

No longer taxable means not filing a full year 1040. When you leave, you will have the option of filing dual status, making your departure date the last day of your "US taxation" on world income. or you can elect to file full year 1040 that year, reporting all income. In the ;latter case, all your cap gains incurred would be taxable in US, and you would not have any CDn tax to write off.

So, it is suggested, unless you move away in the early part of the year, that you wait until jan 1 of the next year, so that the option of full year 104 can be made without incurring unnecessary cap gains tax.

[chelavnzuo]

Thanks again nelsona,

So whenever I leave US I have the option to either file dual status or full year 1040 for that year.

If I choose the former option and then ash out the "winners" in Canada, no capital gains will be taxed by IRS, or
If I choose the latter, I should wait until next calendar year to cash out the gains

Is my understanding correct?

Many thanks!