CRA/IRS Tax Treatment of Capital Loss Carry Forwards

[bcbound]

I am a dual US-Canadian citizen, soon returning to live in Canada after being in the US for quite awhile. I have a substantial net loss carry forward accumulated from long term stock trading losses. Will I be able to preserve that NOL for use against future gains?

[nelsona]

In US, yes. You can use them against future cap gains, or at $3000/yr of other income.

In canada, no; your stocks are zeroed when you arrive, and you can only carry forward losses which you have declared on your Cdn return.

It should be pointed out howver, sicne you will be paying Cdn tax first on your cap gains, and that teh tax will be used as a credit against any US cap gains, the losses you have now to use towrds your US taxes will be of little use.

Be sure to cash in any winners you have before coming to Canada, in order to reduce your loss carryforward as much as possible.

[bcbound]

Thank you. Is there a scenario, that while residing in Canada, my accumulated US cap losses could be used, for example if cap gain taxes paid in Canada do not generate a large enough credit to offset US cap gains liability?

[nelsona]

That is the only scenario. Trouble is it is unlikely that the Cdn gains tax will be significantly lower (if at all lower) than your US cap gains tax, to make a dent in your carryforward. I suppose short-term gains may trigger a higher tax in US than in Canada.

The only scenario I can think of fis if your Cdn home would appreciate so much that when you sold it would exceed the US tax-free limit, while remaining tax -free in canada. But we are talking $250K-500K her.

[nelsona]

Generally US citizens have no problem reducing their US tax to zero, without any cap gains carryforwrd.

So, your past losses are essentially lost when you move to Canada. Use them before moving if you can.