Hi,
I wanted to post this message as I'm a bit confused with the NEC schedule. Simply put I do not know where to put the gains from the sale of my stock. One thing to note is that I have not been in the US for more than 183 days last year. Here is the excerpt:
Lines 16 Through 18—Capital Gains and Losses From Sales or Exchanges of Property Include these gains only if you were in the United States at least 183 days during 2015. They are not subject to U.S. tax if you were in the United States less than 183 days during the tax year.
Can anyone tell me where I need to report the sale of my stocks? The only place I can think of is line 14 where you report Capital Gains and losses. Also, I will be using the cost basis from the date of my deemed disposition in Canada.
Any comments would be appreciated.
Question regarding Capital Gains on 1040NR
Moderator: Mark T Serbinski CA CPA
If you sell your stock after leaving Canada, but in the same year that you left Canada, and are still eligible to file 1040NR, then you simply do not report the sale in US.
It's not like you are making a killing, you had deemed disposition tax in Canada to pay.
It's not like you are making a killing, you had deemed disposition tax in Canada to pay.
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
Hi,
That is correct. I will have a deemed disposition tax to pay in Canada. However, the difference in cost base between deemed disposition in Canada and when I sold them in US is about $100 per unit. In my case it will be $3000 in capital gains difference. Depending on my actual tax rate, so I might not be exact here, but it could be anywhere from $450 to $750! That's quite a bit of money tax free!
Not that I don't like it but it just does not seem right that IRS would be ok with it. What if I had one million of capital gain? That would be thousands of dollars of tax that I would not pay to anyone - neither Canada nor USA. It just does not seem right and if it is, it's a great loophole.
Please elaborate...
That is correct. I will have a deemed disposition tax to pay in Canada. However, the difference in cost base between deemed disposition in Canada and when I sold them in US is about $100 per unit. In my case it will be $3000 in capital gains difference. Depending on my actual tax rate, so I might not be exact here, but it could be anywhere from $450 to $750! That's quite a bit of money tax free!
Not that I don't like it but it just does not seem right that IRS would be ok with it. What if I had one million of capital gain? That would be thousands of dollars of tax that I would not pay to anyone - neither Canada nor USA. It just does not seem right and if it is, it's a great loophole.
Please elaborate...
What is to elaborate?
You left Canada and have prepared a departure return on which you determined cap gains based on your departure date.
Since -- according to you -- you do not yet meet any of the IRS standards for filing a 1040 in 2015, you can file a 1040NR. On 1040NR, you only report US-sourced income. As the 1040NR points out, your cap gains are not considered US-sourced, and you don't report them, neither on page 1 nor on NEC. You just have to ve sure that you did NOT meet SPT for 2015 (using the 3 year calculation, you might have)
Not your fault that US and Canada's tax system don't meld exactly. And congratulate yourself that your timing worked. It could have been the other way 'round and you could have lost $3000 between departure date and sell date which you would not be able to claim either.
Console yourself with the fact that you are paying slightly more in income tax on your US income by filing a 1040NR anyway, if that makes you feel better.
And don't worry that CRA *could* claim that because you filed 1040NR you couldn't 'depart' from Canada. CRA realizes that transition year to US can leave a gap. They are happy with their deemed dispo tax.
You left Canada and have prepared a departure return on which you determined cap gains based on your departure date.
Since -- according to you -- you do not yet meet any of the IRS standards for filing a 1040 in 2015, you can file a 1040NR. On 1040NR, you only report US-sourced income. As the 1040NR points out, your cap gains are not considered US-sourced, and you don't report them, neither on page 1 nor on NEC. You just have to ve sure that you did NOT meet SPT for 2015 (using the 3 year calculation, you might have)
Not your fault that US and Canada's tax system don't meld exactly. And congratulate yourself that your timing worked. It could have been the other way 'round and you could have lost $3000 between departure date and sell date which you would not be able to claim either.
Console yourself with the fact that you are paying slightly more in income tax on your US income by filing a 1040NR anyway, if that makes you feel better.
And don't worry that CRA *could* claim that because you filed 1040NR you couldn't 'depart' from Canada. CRA realizes that transition year to US can leave a gap. They are happy with their deemed dispo tax.
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
Thanks for reply.
Just to make sure that I double check everything...
The stock that I owned was "given" to me as part of job benefits. I worked for a Canadian subsidiary of a US based company. Last year I moved to US to work in the headquarters of that company. So I just wanted to make sure that this somehow does not make it a US sourced income.
Again, the stock of the company was "paid" to me while working in Canada. However, I sold it once in the US and it is a US stock of the company I work for. From legal stand point the two companies are different (two separate entities) but I wanted to double check that me moving to US and selling it in US and the stock being of a US company somehow did not make it a US source.
Thanks!
Just to make sure that I double check everything...
The stock that I owned was "given" to me as part of job benefits. I worked for a Canadian subsidiary of a US based company. Last year I moved to US to work in the headquarters of that company. So I just wanted to make sure that this somehow does not make it a US sourced income.
Again, the stock of the company was "paid" to me while working in Canada. However, I sold it once in the US and it is a US stock of the company I work for. From legal stand point the two companies are different (two separate entities) but I wanted to double check that me moving to US and selling it in US and the stock being of a US company somehow did not make it a US source.
Thanks!
I wanted to follow up on this because I checked your previous response to my question regarding selling of stock. Please see this post: http://forums.serbinski.com/viewtopic.p ... highlight=
In there you mentioned that showing the sell of my stock is going to be tricky which implies that I will have to report it on form 1040NR. Is this something different or am I not explaining the situation right? Can you please reply?
Thanks!
In there you mentioned that showing the sell of my stock is going to be tricky which implies that I will have to report it on form 1040NR. Is this something different or am I not explaining the situation right? Can you please reply?
Thanks!
Please read what you first posted: you are not in US 183 days.
These accounts are not in US either.
You have a loophole. Be happy.
These accounts are not in US either.
You have a loophole. Be happy.
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
From IRS Pub. 519
"If you were in the United States for less than 183 days during the tax year, capital gains (other than gains listed earlier) are tax exempt unless they are effectively connected with a trade or business in the United States during your tax year"
The "gains listed earlier" do not apply to you.
Can we end this now?
"If you were in the United States for less than 183 days during the tax year, capital gains (other than gains listed earlier) are tax exempt unless they are effectively connected with a trade or business in the United States during your tax year"
The "gains listed earlier" do not apply to you.
Can we end this now?
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