cap gains, different cost basis, tax credit

[readtheform]

I am US citizen, moved to Canada without reading this forum first. Moved to Canada when the market was at bottom, so now upon selling US mutual fund holdings, my cap gains as considered by Canada are much higher than cap gains as considered by the US because the cost basis in the US is higher than cost basis in Canada.

Since i live in Canada, Canada gets first taxation on my cap gains. I may have US taxes to pay as well this year. When I take tax credit in US for Cdn taxes on cap gains, do I have to pro-rate that tax to account for the fact that the cap gains in the US is a lesser amount than in Canada? ie if cap gains in US is $1000 and in Canada is $2000, do I get tax credit of all the Canadian cap gains tax or only half?

Thanks!

[rlb]

I will be interested in the answer by one of the experts, but from what I have seen in another example elsewhere, you can apply the tax credit based on the Canadian tax on the whole $2,000. (nelsona?) Your resulting US tax will likely be zero.

Perhaps this is why the experts recommend you sell all losers in the US before the move. That way you get a capital loss which you can apply to other capital gains right then, or $3000 against ordinary income, with a carryover of the excess for future years. Of course, if you reinvest in other stocks at that time, and they have a large capital gain in future years, your future US capital gain income will be larger than if you had retained the original stock, but as it will match the Canadian gain (except for currency fluctuations) your US tax after foreign tax credit will still likely be zero.

[nelsona]

You get to claim the entire Cdn tax. However, since you will be reporting very little US gains, then you will get litttle credit.

Add this to the fact that (a) you will hardly be paying US tax in any event, and the fact that the tax is spread over all your income, not just the gains, and really your only tax liability will be in Canada, so the credit in US will be minimal.