Departure Tax (from Canada to US)

[mchuchra]

I am a U.S. citizen have been living and working in Canada for 3 1/2 years. I did attain Canadian Permanent Residency status about a year ago. I have been married to a Canadian citizen (US green card holder) for 10 years, and we lived in the US prior to 3/ 1/2. If we move back to the US before the 5 years elapse in Canada, what assets would be subject to Canadian departure tax, if any? I have a stock trading account in the US which has sat idle since moving to Canada. We each have bank accounts in US (savings prior to moving) and Canadian accounts (with savings from wages earned in Canada over last 3.5 years. I have several old US based retirement accoutns (401Ks and Roth IRA). Does that answer change if we stay in Canada longer than 5 years?

Finally, we don't yet know whether we want to ultimately want to settle in U.S or Canada and rather keep options open to follow career opportunities. Are there disadvantages for me to becoming a Canadian citizen from a taxation perspective, knowing that we may move back to U.S.?

[nelsona]

Deemed disposition does not apply to any pensions. It does not apply to bank accounts, since there is no accrued gain in those. It really only applies to non-sheltered investments held at the time of departure.

Deemed disposition upon departure from canada does not apply to assets held on arrival in canada, if you are resdndent for less than 60 months in the last 10 years before departure. So, yes, 5 years makes a difference. Remember though that assets you held upon arrival in canada also are considered to have their cost basis from that day, not their original cost basis, so there is good chance your gain for Cdn purposes is lees than that for US purposes.

This exemption applies only to the actual shares shares that you has at the time you left US, not any you received later, or exchanged stock, as in a change in companies.
See
http://www.cra-arc.gc.ca/E/pub/tp/it451r/it451r-e.html
Paragraph 11 id the important one.

Getting Cdn citizenship has no impact on your future taxation in Canada based on residency. You go back to US, you will be Cdn non-resident either way. Getting citizenship would make it easier for you to move back to canada later, of course.

As an aside, since you have a Roth, I trust you have been correctly reporting the income generated in it, or have been exempting it. There is a new procedure for this spring that you must include in your return.

I've addressed this in other posts.

[danny]

Does this 60 months in the last 10 years rule still apply ? If so, does it apply to new migrants only or basically to any individual who was a resident of Canada for example, then left and then returns to Canada at a later time ?

So let us take an example.

An individual is resident in Canada leaves and works in Singapore for 7 years before returning to Canada. AFter working in Canada for 4 years, he leaves again for Singapore. Then at that point, he should owe no departure tax as he has been in Canada for 48 months in the last 120 months. Correct ?

Confusing.

[nelsona]

It applies, but only to investments you held at the time of last arrival in canada.

So, anything that was traded/purchased while in acanada will be subject to departure tax.

You don't escape departure tax, only certain investments may qualify for exclusion.

[danny]

So basically the statement that 'Individuals who are resident in Canada for less than 5 years are exempt from departure tax' is false, as is stated on some web sites.

[nelsona]

That is correct. It is false to make such a blanket statement.

[danny]

Indeed not good but you find this statement on many web sites.

thanks