I’ve read several posts on here about selling your non-retirement account losers before moving from the US to Canada and then wait one year after your arrival to Canada to sell your winners. I also read that this does not work for US citizens or Green Card holders.
I’ve been a US resident Green Card holder for the last 10 years. My move to Canada will likely be permanent and it looks like I will be deemed to abandon my Green Card after I have been away from the US for more than 365 days or I can voluntarily give it up. Is this correct? If so, should I still sell my losers before leaving as I know I will no longer have to file as a resident in the US after I lose the Green Card?
Sell Losers Before Leaving US?
Moderator: Mark T Serbinski CA CPA
the selling of losers DOES apply to US citizens and GC's moving to Canada, since it allows them to at least get some tax relief by claiming cap losses while they still have a US tax liability (few USC's and GC's owe tax in US once they move to Canada). and CRA does not recognize any losses accrued while non-resident, so no value there.
It is the timing of selling of winners that has little value for them.
So, yes, everyone should sell losers before moving to Canada.
as to your US taxability after you give up GC, I would suggest reading up on expatriation, Form 8854, and long-term resident issues. IRS Pub 519 has a good discussion on this, as well as some threads on this board.
It is the timing of selling of winners that has little value for them.
So, yes, everyone should sell losers before moving to Canada.
as to your US taxability after you give up GC, I would suggest reading up on expatriation, Form 8854, and long-term resident issues. IRS Pub 519 has a good discussion on this, as well as some threads on this board.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Ok thank you so much.
Just so I understand correctly, if you maintain green card status or are a US citizen you must have to keep the same cost base in the US; you just get a new cost base for Canadian purposes when you arrive right?
In other words, if I don’t sell the losers before I leave; when I sell while in Canada I still claim the loss in the US because the cost base in the US does not change. However, as you pointed out, the loss might be wasted because at that point I likely won’t have any other gains or income in the US to offset the loss against; which is why they should be sold before I leave .
By the same token, if I sell the winners before or after the move it doesn’t really matter, because the growth while resident of the US will always be taxed in the US regardless of when I sell because I still maintain the same cost base for US purposes?
Just so I understand correctly, if you maintain green card status or are a US citizen you must have to keep the same cost base in the US; you just get a new cost base for Canadian purposes when you arrive right?
In other words, if I don’t sell the losers before I leave; when I sell while in Canada I still claim the loss in the US because the cost base in the US does not change. However, as you pointed out, the loss might be wasted because at that point I likely won’t have any other gains or income in the US to offset the loss against; which is why they should be sold before I leave .
By the same token, if I sell the winners before or after the move it doesn’t really matter, because the growth while resident of the US will always be taxed in the US regardless of when I sell because I still maintain the same cost base for US purposes?
Its not so much that you " won’t have any other gains or income in the US to offset the loss against". You will always have income and perhaps gains. It's that you likely won't owe any US tax in subsequent years, while living in Canada, as your exemptions, and foreign tax credits will take care of that.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Ok makes sense, thank you.
I’m just confused about one more thing. What about the growth AFTER you arrive in Canada? I read on this forum that gains on non-retirement accounts are normally based on residency via treaty, but as a citizen or Green Card holder I must still have to report POST arrival gains in the US as well.
I also read a recent post on this forum about re-sourcing and I think I understand it. Sounds like the gains would be re-sourced as Canadian source income and taxed in Canada first, with foreign tax credit in US not Canada. Canada would not allow foreign tax credit because non-citizen or non-Green Card holder would not pay tax on this income in US correct?
So I suppose my question is if I sell the winners AFTER arrival, would that mean just the POST arrival gains are re-sourced to Canada or PRE and POST gains are both re-sourced? Hope I explained this ok.
I’m just confused about one more thing. What about the growth AFTER you arrive in Canada? I read on this forum that gains on non-retirement accounts are normally based on residency via treaty, but as a citizen or Green Card holder I must still have to report POST arrival gains in the US as well.
I also read a recent post on this forum about re-sourcing and I think I understand it. Sounds like the gains would be re-sourced as Canadian source income and taxed in Canada first, with foreign tax credit in US not Canada. Canada would not allow foreign tax credit because non-citizen or non-Green Card holder would not pay tax on this income in US correct?
So I suppose my question is if I sell the winners AFTER arrival, would that mean just the POST arrival gains are re-sourced to Canada or PRE and POST gains are both re-sourced? Hope I explained this ok.
Re-sourcing is done for TAX purposes, not income purposes. Since, as you correctly conclude, you would not have to pay tax in US on most gains if you weren't a USC or GC, you will (a) not get any credit in Canada for US tax, and (b) will be able to re-source sufficient US gains to reduce the US tax to zero.
I believe, however, that the gains are sourced when the alienation of property occurs, so the entire gain would be viewed as cdn.-sourced.
Another reason to sell losers.
I believe, however, that the gains are sourced when the alienation of property occurs, so the entire gain would be viewed as cdn.-sourced.
Another reason to sell losers.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Sorry I think I`m missing something; this is getting confusing. If the entire gain is considered re-sourced (pre AND post arrival gain), I guess this would mean the entire loss would be re-sourced as well?
If that`s the case and I did not sell the losers before leaving, the entire loss would be re-sourced to Canada when I sell. This would essentially eliminate the step-up in ACB you receive on arrival and eliminate the primary advantage of selling them before coming to Canada. This would mean that Canada would give you credit for the pre-arrival loss would it not? In which case it really wouldn`t matter when you sell them; just like it doesn`t matter when you sell the winners.
If this is true, the arrival step-up in ACB for both winners and perhaps losers is basically meaningless for US Citizens and Green Card Holders. The step up in ACB appears to be the primary reason to sell losers before coming; as it essentially eliminates the loss. If the re-sourcing “trumps†the bump-up, then maybe it doesn’t really matter when you sell them? Am I overlooking something?
If that`s the case and I did not sell the losers before leaving, the entire loss would be re-sourced to Canada when I sell. This would essentially eliminate the step-up in ACB you receive on arrival and eliminate the primary advantage of selling them before coming to Canada. This would mean that Canada would give you credit for the pre-arrival loss would it not? In which case it really wouldn`t matter when you sell them; just like it doesn`t matter when you sell the winners.
If this is true, the arrival step-up in ACB for both winners and perhaps losers is basically meaningless for US Citizens and Green Card Holders. The step up in ACB appears to be the primary reason to sell losers before coming; as it essentially eliminates the loss. If the re-sourcing “trumps†the bump-up, then maybe it doesn’t really matter when you sell them? Am I overlooking something?
There is a difference between sourcing and gain.
Canada's gain is based on arrival date. US gain is based on entire history.
As I said, I believe the SOURCE will be determined at selling time. But even if it isn't your pre-arrival losses will be of no value, if not triggered before entering Canada. Bi=ut either way you will have the Cdn tax to get credit.
And it is NOT the step up in ACB that drives selling losers, it is the ensuring that you get SOME tax benefit on your US return, since you won't need any once you leave US.
In reality, selling ALL losers should also be accompanied by selling enough winners such that your overall cap loss is roughly -1500 (-300 for couples) but I didn't feel it needed to be brought up.
You'll have enough to worry about when moving just taje care of the basics.
You had enough resources on this from me.
See you in May
Canada's gain is based on arrival date. US gain is based on entire history.
As I said, I believe the SOURCE will be determined at selling time. But even if it isn't your pre-arrival losses will be of no value, if not triggered before entering Canada. Bi=ut either way you will have the Cdn tax to get credit.
And it is NOT the step up in ACB that drives selling losers, it is the ensuring that you get SOME tax benefit on your US return, since you won't need any once you leave US.
In reality, selling ALL losers should also be accompanied by selling enough winners such that your overall cap loss is roughly -1500 (-300 for couples) but I didn't feel it needed to be brought up.
You'll have enough to worry about when moving just taje care of the basics.
You had enough resources on this from me.
See you in May
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Ok thanks for explaining this further! I think I get it now. For whatever reason I was thinking that the entire loss (pre and post) could come over to the Canadian side (via re-sourcing) and be used there. So instead of using the loss in the US before leaving, I thought you could just use it in Canada after arrival via re-sourcing. I think I was just not understanding how re-sourcing actually works.
Re-sourcing must just mean who has the right to tax the income first, it doesn't alter the ACB's on either side (you have different ACB's for each side).
Re-sourcing must just mean who has the right to tax the income first, it doesn't alter the ACB's on either side (you have different ACB's for each side).