Another one moving from the US to Canada

[J972]

Hi all,
These forums are great and highly informative, thanks everyone for their contributions.

I’m currently evaluating a job offer in Canada (Canadian citizen) and will likely accept. These forums have been helpful however I’m still left with a few questions.

I am a US permanent resident in the US for 14 years and 8 years on the Green Card. At least initially my intent is to try and keep the GC, so I will have to continue filling US taxes. If I do give it up I don’t believe my wealth and earnings will trigger the expat tax.

1. 401k/IRA/ Tiny Roth- My intention is to leave these in the US and roll the 401k into the IRA. Roth conversion or RRSP conversion seems too costly. Schwab says they are okay with my leaving this in the US. Does anyone have real experience with this and Schwab?

2. Taxable Stocks- I will sell losers and exercise options before moving and transfer remaining stocks to a Canadian brokerage. What is the best way to deal with vested RSU and ESPP?

o I assume RSU are treated like other stock.
o Are ESPP shares treated the same way? In the US they have complex accounting rules. Does Canada treat their sale like regular stock sales? How does this get reported on the US return?

3. As for stock sales once in Canada, I know the cost-basis from a CCRA perspective changes which is favorable for winners. But once again if you still need to file a US return to you still benefit from this or does the US require the cap gains to be based on the original cost basis. Or will you just be reporting your net cap gains on stock sales in Canada to the US. Any pitfalls to avoid here?

4. Final US company Pay- Since I plan to leave the US shortly after my last day at my current job. Do I need to receive final pay (vacation payout) prior to entering Canada or is it understood that the money would be from work within the US.
Thanks for the help,

J

[nelsona]

Good post.

1. RRSP conversion is pointless. I would seriously consider doing some of the Roth conversion if you can. This is a gold mine.

2. I'll skip this, except to say that selling losers is the correct strategy.

3. There is no way around paying US tax on the growth you accrued before leaving at some point. You could start with balancing out the winners and losers to give you net zero cap gains for this year. Then its a matter of triggering these reamining gains in years perhaps when you use the 2555 exclusion and have little or no other income, and using the long-term gains rate wherever possible.

4. If the money is recieved after you arrive in canada, it is considered taxable in canada.

[J972]

Thanks Nelson, very helpful as always.

So I guess there are no special considerations with ESPP. If the stock went down sell before leaving, if not keep it until you get to Canada.

J

[polarys]

Regarding your Green Card (Permanent Resident Card) - I did the move from the US to Canada about 6 years ago and I had a PRC at the time. From what I understand, if you move to another country with the intent of living there permanently, or are away for more than 365 days, the UCIS may (will?) deem your permanent resident status to be abandoned. In my case, I filed a I-407 to formally and officially abandon it, otherwise it can cause some problems if you ever want to re-enter the US, even if it's just for vacation.

[J972]

I am actually taking the I-131 option to obtain a 2 year re-entry permit to leave my options open. My understanding is that currently to voluntarily give up the GC you need to file I-407 but also if you are a long-term GC holder (8/15 years) and lose you GC for any reason, form 8854. With form 8854 if you meet relatively high income tax liability or net worth thresholds or failed to file taxes in the US you could be subject to some nasty expatriation taxes.

[polarys]

Okay that makes sense. In my case I literally only had my PRC for a few months (the process took a long time!) and since we were moving to Canada permanently it seems the proper thing to do to abandon it.

[ExpatAmerican]

RE: Scwab IRA management for Canadian residents. That is news to me. I am thinking that this is a recent development. I have certainly had immigrating US residents tell me that Schwab has informed them that they cannot deal with Canadian resident IRA's or cash accounts, once they become Canadian tax residents. As recently as February, as I recall. I would suggest confirming with them that you will be able to continue to makes changes to the account as well. Many US firms will not force Canadian residients to transfer, so long as they make no changes to their portfolios.

[nelsona]

I would have this confimred as well. I have heard of several people told tha tis "OK", until 2 months after they leave, and then they are told to collapse thre account.

You need to absolutely spell out to schwab that you are leaving US for Canada, and that you are not a US citizen, and that you wish to activel manage your account.

[J972]

Thanks guys, I did call Schwab on two separate occasions and was told both times that it was okay for a Canadian resident to manage their retirement accounts at Schwab. I'll have to see if they will give me something in writing.

It will likely not be a problem as long as I maintain the GC and have a US address to use. Etrade on the other hand has given me very mixed information. The last time i called they said it was okay, but I'm not entirely convinced.

I wonder if some of the mixed data has to do with size of the accounts. I could see them not wanting to deal with small accounts.

I've also read and heard mixed messages on peoples experience with Ameritrade. I'd rather avoid going the wealth management route if possible at least for now.

[ExpatAmerican]

I believe it has everything to do with your continuing to use a US address. I would suspect that the (US-based) institution (Schwab in this case) will allow you to continue as usual because your (technically inaccurate) address will continue to show you as a US resident. The easy way to ascertain whether your proposed "solution" is legal or not is to try to get it in writing (even an email). And I would suggest no one in the financial services industry will put in writing that use of a false US address (false in that it is not your primary residence) by a now Canadian-resident is an accepted "solution" to your dilemma. The always favored solution is to be legally compliant, with an advisor who is licensed in your (new) jurisdiction, and is FINRA-licensed to deal with qualified (US legacy) retirement plans (IRAs)

[nelsona]

Amen.