Question about FTC calculation

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pokka
Posts: 4
Joined: Sat Feb 27, 2021 10:16 pm

Question about FTC calculation

Post by pokka »

I live in the US. Suppose I buy a stock for $A today.

After some time I move to Canada and set up my permanent residence there.
On the day of the move, the stock is worth $B.


Then one year later, I sell the stock for $C.


If I understand correctly, I have to pay tax on $C- $B of capital gains to CRA.

On my US tax returns, I will show capital gains of $C - $A.

If the tax I pay to CRA for the Canadian capital gain is more than the tax I need to pay to to the US for the (larger) US capital gain,
does that allow me to cancel out (via Form 1116, FTC) my US tax obligation for the stock?

(I ask because the taxes are technically on different amounts, so it seems unclear whether the canadian tax on the smaller capital gain should be allowed to wipe out the US tax on the larger capital gain).

Thanks in advance!
nelsona
Posts: 16947
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Question about FTC calculation

Post by nelsona »

You will be able to use the Cdn tax against the US tax (form 1116), but it may or may not cancel out the US tax (likely it will not completely). Depends on the numbers and your other income.
I am taking my usual break from this site until May. Always too many tax-form specific questions at this time of year...
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
pokka
Posts: 4
Joined: Sat Feb 27, 2021 10:16 pm

Re: Question about FTC calculation

Post by pokka »

Awesome, thanks very much!
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