Deemed Disposition Timing And Tax

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

Moderator: Mark T Serbinski CA CPA

instagramaustralia
Posts: 1
Joined: Wed Oct 20, 2021 2:32 am

Re: Deemed Disposition Timing And Tax

Post by instagramaustralia »

From 2001 through 2018, significant federal tax changes have reduced revenue by $5.1 trillion, with nearly two-thirds of that flowing to the ...
https://realfollowers.com.au/
canadiandeserter
Posts: 58
Joined: Sun Mar 01, 2015 10:52 pm

Re: Deemed Disposition Timing And Tax

Post by canadiandeserter »

nelsona wrote:
> Article, XIII.5
> Para. 4 describes why cap gains are paid by residents.
> Para. 5 explains that a state can tax non-residents for a period of up to
> 10 years after leaving if it was subject to deferred departure tax.
>
> If one waits the 10 years, they can no longer tax you.

Thank you for the reference.

The treaty seems to include Canada's deemed disposition in "alienation of property". In this case, the first-mentioned state (Canada) would be able to levy the departure tax if the individual meets 5(a) and 5(b) at the time of emigration.

ITA 220(4.5) only defers the payment of departure tax that was due in the emigration year. Even if the property was sold 10 years after emigration when Article XIII 5(a) and 5(b) no longer applies, the departure tax was already "levied" in the emigration year, so the CRA would still be allowed to collect on the deferred tax, no?

Getting a headache trying to decipher the treaty and ITA and reconcile the different terminology. 😵
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Deemed Disposition Timing And Tax

Post by nelsona »

I wouldn't worry about it. The chances you will keep the property 10 years are slim.

But, indeed, the 10 year clause is valid.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
canadiandeserter
Posts: 58
Joined: Sun Mar 01, 2015 10:52 pm

Re: Deemed Disposition Timing And Tax

Post by canadiandeserter »

Many of Canada's tax treaties with other countries have clawback periods of only 5 or 6 years, so the potential tax planning opportunities could be interesting in case some property balloons in value.
Post Reply