Cdn Non-Resident & US Non-Resident Alien: Capital Gains

[Nomad4Ever]

I am a non-resident Canadian who worked in the US for 5 years, then uprooted all and departed for South America in mid 2006. Currently, I reside and have tax domicile in Uruguay, South America.

Regarding US taxation, I did not obtain a sailing permit prior to exit, instead I filed as resident alien for the entirety of 2006, and plan to file in 2007 as US non-resident alien, as I no longer met the substantial presence test.

My question concerns treatment of capital gains for US taxes. I had purchased US stock while a US resident some years ago, then sold this stock in 2007, which will be considered "Income Not Effectively Connected". As such, is there no need to report this gain in the 1040NR? Or is there some form of deemed disposition when I changed status from US resident to US non-resident?

Thanks for any help offered!

[nelsona]

Your assesment of the situation is corect. You owe no US tax on the gains truiggered by sales in 2007 or later.

It is always a good move to delay any cap gains until after you leave US (or in your case, the next calendar year) as this absolves you of any US tax.

One has to be carefulk of the revesre situation too, if, say, you lived in Uruguay for 5 years, and then moved to US and then sold some stock, you would be taxable in US on all the gain.

Uruguay has no treaty with US so there is no protection from this.