Deferred Capital Gains

joeinusa · Post by **joeinusa** » Wed May 24, 2006 10:43 am

When my wife and I moved to US in 2001, she had a deemed disposition on stock that we deferred paying until sold. Some of that stock has now been sold. What is the correct amount to send to Canada government? I suspect I could call Ottawa but getting the right person may take a bit of time.

My wife had both deemed gains and deemed losses but net tax on the deemed disposition of the whole portfolio was deferred.
Would the formula be one of the following or something else:
1)If 15 % of 2001 total stock portifolio value was sold, send 15% of deferred taxes
2)If 25% of net gain at 2001 has been realized to date by sales of associated stock position, 25 % of deferred taxes should have been send to date.
3) Some other calculation
Perhaps there is not one specific method.

How quickly do we need to send in payment? . By end of year? end of quarter? following year April?

nelsona · Post by **nelsona** » Wed May 24, 2006 3:02 pm

There is no written guidance on how to pay this bac, so you may have to call international and ask them.

I would do it on a 'number of shares' basis, although the fact that you had some gains and some losses comp[licates the calculation.

From a US tax point of view, remember that you have the option of using either the 'true' ACB or the 'deemed' ACB in calculating your US cap gains.

You shouldn't use the Cdn tax as a credit on your US return (since it is not considered foreign income because you live in US), but you can use the tax as a Schedule A deduction in the year you actually pay it.

joeinusa · Post by **joeinusa** » Tue Oct 24, 2006 9:27 pm

International told me that I needed to file and pay by the end of April in the following year. i.e. for assets sold in 2006 by April 2007.
No form to use, simply a letter explaining what stocks from the list of stocks on which the deemed disposition were sold and how we calculated the amount owed in current year.
I intend to use a percentage of total method. If 15.5% of the value at deemed disposition have been sold this year, pay 15.5% of the deferred tax. I gather from the person I was speaking to that any reasonable formula will be accepted.
Other possible ways might have included only paying in year we sold winning stocks (winning at the deemed date in 2001). Perhaps that could have been seen as reasonable but perhaps not.

Thanks Nelson for your comments. They help.

nelsona · Post by **nelsona** » Wed Jan 21, 2009 11:24 am

Remember this? I told you 2 years ago that Cdn stock is not considered foreign

joeinusa · Post by **joeinusa** » Wed Jan 21, 2009 2:52 pm

Yes you did. May have been focusing on the calculation of what to pay Revenue Canada. However, now this makes sense to me. Gains on Canadian stocks not taxable in Canada for US residents and therefore not foreign income for US resident either. Instead gains are treated and taxed in US exactly like gains on US stock. Tax rule is logical in this case.

nelsona · Post by **nelsona** » Mon Jan 26, 2009 9:46 am

I just wanted to clarify slightly tn-US-sourcedhat just become something is not taxable in US doesn't, by itself, make it Cdn-sourced. It is in the strict realm of the 'eliminating double-taxation' clause of the treaty that US-sourced income morphs from US to Cdn-sourced income, due to its tax treatment and otther treaty definitions.