Hi,
I am visually impaired so bare with me if you can. It took me a long time to even to log on. If these questions are answered in the forum elsewhere maybe you could send the links. I couldn't find them. Thanks.
I am a USC and married a Canadian in 2007. I applied for PR in Canada in 2007. Worked as a self employed consultant in the US during 2007. It will likely be granted in a few months time. A temp work permit came in the mail recently but I haven't even applied to work in Canada yet. For 2007 I filed a US 1040.
My questions:
1) Does the US have a departure tax now?
2) Can I still keep my rollover IRA in the US without having it be subject to any withholding or taxes from either country.
3) I have substantial acrrued capital gains in US mutual funds and stocks that i can not transfer "in kind' to Canada. Am I forced to liquidate these? If so should I sell before i get my residency or after. When is it better to sell the losers.
4) If I return to the US someday will I have to pay a departure tax from canada and if so how is the basis calculated and in what currency? can i choose the currency?
Thank you for the help.
T
US Citizen married to Canadian
Moderator: Mark T Serbinski CA CPA
1. You remain taxable in US forever.
2. Your IRA will only have US withholding when funds are withdrawn. Then you will include the withdrawl on both your US and Cdn returns, to determine final taxation.
3. Since you are a US citizen, it really doesn't matter, as eventually you will be taxed in US anyways. For Canada, your investments get a new basis the day your move, so you will have little if any cap gains tax for a while. With that in mind you may want to sell all losers, and match an equivalent amount of winners to come out 'even' for 2008. I would be triggering any cap losses this year in any event, as they won't be much good to you in the near future, other than against those gains. The $3000/yr loss against income won't be much good, so you will want to try to even that out with gains.
But, ultimately you will always pay cap gains in US for what you have already gained, and US and Cdn cap gains tax on what you make in future. The tax in canada will come close to cancelling the US tax.
You do not have to sell your funds immediately, unless your US broker wishes to cease his relationship with you. There *might* be a broker that deals cross-border but they are rare. "Seabank" comes to mind. search that on web.
4. Just as your investments get a new cost basis for Cdn purposes when you enter, they also are deemed sold the day you leave. The currency is Cdn of course (as is everything you report on your Cdn return, evaluated at the rate in effect when your cost was established, and the rate in effect when you leave.
You will ALWAYS have a US tax return to file, every year, reporting ALL your income. All that will change is that you will also be taxed in canada on ALL your income. You will then use 2555 to exclude your wages, and/or use 1116 to get credit. There should be litlle or no tax in US (especially once you have divested your US holdings) except on your IRA, but will have to file every year.
2. Your IRA will only have US withholding when funds are withdrawn. Then you will include the withdrawl on both your US and Cdn returns, to determine final taxation.
3. Since you are a US citizen, it really doesn't matter, as eventually you will be taxed in US anyways. For Canada, your investments get a new basis the day your move, so you will have little if any cap gains tax for a while. With that in mind you may want to sell all losers, and match an equivalent amount of winners to come out 'even' for 2008. I would be triggering any cap losses this year in any event, as they won't be much good to you in the near future, other than against those gains. The $3000/yr loss against income won't be much good, so you will want to try to even that out with gains.
But, ultimately you will always pay cap gains in US for what you have already gained, and US and Cdn cap gains tax on what you make in future. The tax in canada will come close to cancelling the US tax.
You do not have to sell your funds immediately, unless your US broker wishes to cease his relationship with you. There *might* be a broker that deals cross-border but they are rare. "Seabank" comes to mind. search that on web.
4. Just as your investments get a new cost basis for Cdn purposes when you enter, they also are deemed sold the day you leave. The currency is Cdn of course (as is everything you report on your Cdn return, evaluated at the rate in effect when your cost was established, and the rate in effect when you leave.
You will ALWAYS have a US tax return to file, every year, reporting ALL your income. All that will change is that you will also be taxed in canada on ALL your income. You will then use 2555 to exclude your wages, and/or use 1116 to get credit. There should be litlle or no tax in US (especially once you have divested your US holdings) except on your IRA, but will have to file every year.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
Nelsona, thanks for your advice.
I keep reading about this new legislation in the states that imposes a departure tax on assets of 2MM with an exemption of 600K. Also it would impose 30% withholding on IRAs left in the US. Politics aside, my question is:
1) do you know if this has actually passed into law yet?
2) Does it only propose to effect Green card holders and US citizens who give up their citizenship or US Citizens that retain their citizenship but chose to live abroad.
3) would I be exempt because of the US-Canada treaty?
I don't who this guy is in the blog link or if he is credible but if gives summary of what i've been reading.
[http://nestmannblog.sovereignsociety.co ... ex.htmlurl]
I keep reading about this new legislation in the states that imposes a departure tax on assets of 2MM with an exemption of 600K. Also it would impose 30% withholding on IRAs left in the US. Politics aside, my question is:
1) do you know if this has actually passed into law yet?
2) Does it only propose to effect Green card holders and US citizens who give up their citizenship or US Citizens that retain their citizenship but chose to live abroad.
3) would I be exempt because of the US-Canada treaty?
I don't who this guy is in the blog link or if he is credible but if gives summary of what i've been reading.
[http://nestmannblog.sovereignsociety.co ... ex.htmlurl]
Currency USD to CND
If I transfer US Dollars (cash) into a US Dollar denominated account in Canada and the US dollar strengthens and I then buy Canadian dollars does this trigger a capital gains event or would I merely pay the exchange fees?
Thank you for all your answers. You are a real help.
Thank you for all your answers. You are a real help.
Thanks again.
Let me make sure I understand this correctly.
1) If the USD strengthens against the CND say 10% and I exchange $2000 USD for CND I will have to pay cap gains on the 200 gain PLUS a fee each time I do a transaction like this?
2) By the same token, if when I become a resident I put all my USD in a USD denominated account, never exchange it, and then someday leave for the US I'll be taxed on the total difference in value (CND) from the time I entered Canada until the day I left?
If the USD strengthens just modestly to somewhere to where it has been historically this will really hurt. Are there any hedges against this?
Let me make sure I understand this correctly.
1) If the USD strengthens against the CND say 10% and I exchange $2000 USD for CND I will have to pay cap gains on the 200 gain PLUS a fee each time I do a transaction like this?
2) By the same token, if when I become a resident I put all my USD in a USD denominated account, never exchange it, and then someday leave for the US I'll be taxed on the total difference in value (CND) from the time I entered Canada until the day I left?
If the USD strengthens just modestly to somewhere to where it has been historically this will really hurt. Are there any hedges against this?
1)The fee reduces your gain, so that won't be taxed.
I wouldn't worry about this, you will be using Cdn dollars in Canada, so it unlikely that IRS will be able to point to one transaction and say that you made a profit on it. Remember that ALL your Cdn dollars will be part of the pooled cost basis.
2) Yes. Why would you want a hedge againd making a profit?
I wouldn't worry about this, you will be using Cdn dollars in Canada, so it unlikely that IRS will be able to point to one transaction and say that you made a profit on it. Remember that ALL your Cdn dollars will be part of the pooled cost basis.
2) Yes. Why would you want a hedge againd making a profit?
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
I am not trying to hedge against the gain.
I am trying to get used to the fact that if I stayed in the US, and say the US dollar strengthen and then I went and bought CNDs I would just get more CNDS. No cap gains.
Now if I become a resident that same transaction would be subject to a cap gains tax merely because of the cost basis that was deemed the day i became a resident. This could cause substantial drag on ones assets.
I am trying to get used to the fact that if I stayed in the US, and say the US dollar strengthen and then I went and bought CNDs I would just get more CNDS. No cap gains.
Now if I become a resident that same transaction would be subject to a cap gains tax merely because of the cost basis that was deemed the day i became a resident. This could cause substantial drag on ones assets.
In the eyes of Canada (and yourself) the US dollar is like a mutual fund. If iits value goes up (ie. its unit price), then you have a gain.
The same is true if you had held C$ 3 years ago. Today you would owe US tax on the gain it made to IRS, because the unit price of C$-fund would have increased from .66 to 1.02. That's not hypothetical. That is what has happened.
The same is true if you had held C$ 3 years ago. Today you would owe US tax on the gain it made to IRS, because the unit price of C$-fund would have increased from .66 to 1.02. That's not hypothetical. That is what has happened.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Nelson,
1) Above you said that I wouldn't have to sell my US brokerage assets immediately and move them to Canada, Is there a deadline?
2) There is a CRA rule that says should I not live in Canada for more than 60 months in a 10 year period then any assets that I had when I first became a Canadian resident will not be subject to disposition taxes should I emigrate back to the US. My question is....since I can only transfer assets to Canada AFTER I become a resident how is it possible to claim this rule if it has to do with assets i had just prior to becoming a resident?
1) Above you said that I wouldn't have to sell my US brokerage assets immediately and move them to Canada, Is there a deadline?
2) There is a CRA rule that says should I not live in Canada for more than 60 months in a 10 year period then any assets that I had when I first became a Canadian resident will not be subject to disposition taxes should I emigrate back to the US. My question is....since I can only transfer assets to Canada AFTER I become a resident how is it possible to claim this rule if it has to do with assets i had just prior to becoming a resident?
For example, if I transfer US dollar assets into Canadian dollar denominated assets then they will be consider completely different assets than what I had prior to being a resident. For example, US domiciled mutual funds can not be transfered to Canada. If I sell them when I become a resident then all of those assets would be outside of the 60 month rule.
This only applies to the actual assets, not those you sell and then replace with other items.
If you have 100 shares of IBM, you can bring those intact to canada, keep them, and leave within 5 years without deemed dispo.
But if you have US mutual funds, your only choice -- to avoid deemed disposition -- is to leave them in US as is. If you sell them to buy Cdn mutual funds, they lose the 60 month protection.
But really, since you will always be taxable on your cap gains in US, why go thru all this to avoid Cdn tax which would be completely credited against your US tax.
If you have 100 shares of IBM, you can bring those intact to canada, keep them, and leave within 5 years without deemed dispo.
But if you have US mutual funds, your only choice -- to avoid deemed disposition -- is to leave them in US as is. If you sell them to buy Cdn mutual funds, they lose the 60 month protection.
But really, since you will always be taxable on your cap gains in US, why go thru all this to avoid Cdn tax which would be completely credited against your US tax.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing