Back to Canada - part year residency question

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fink08
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Joined: Wed Apr 04, 2018 11:56 pm

Back to Canada - part year residency question

Post by fink08 »

My spouse and I are both Canadian citizens. We moved back to Canada in August 2017 and sold our US house. We never got GC.

Based on viewtopic.php?t=7475, it sounds like the most advantageous IRS approach is to file full year 1040 as residents (we met the SPT), and exclude Canadian income using Form 2555. I have filed an extension to allow us to meet the SPT for exclusion since the extension will allow me to stretch the dates we were physically out of the States.

I am confused about the Canadian CRA side. Can I file as a newcomer with a August settlement date? Or do I have to file as a full-year deemed non-resident, given my IRS filing? In other words, if the IRS sees me as resident for 2017, and Canada sees me as resident for Aug-Dec 2017, isn't that a contradiction?
nelsona
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Post by nelsona »

You are a newcomer, with August arrival, and must report all income after that date to Canada, and re-valuate all your holdings, for future cap gains purposes.

This is never impacted by your choice on how to file in US in that year. I would agree that likely full year 1040 using 2555 and 1116 (for non-wages) is the way to go. It is not a contradiction, since filing a 1040 does not imply residence, it is merely a choice (or for US citizens, a necessity).
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
fink08
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Joined: Wed Apr 04, 2018 11:56 pm

Post by fink08 »

Thanks nelsona.

With respect to the deemed disposition, where/how do I declare the cap gain from the disposition? Does that go on the Canada return for 2017?

I assume I don't just get to increase my basis for free.
nelsona
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Post by nelsona »

It is deemed acquisition, so there is no cap gains. you are redetermining the cost basis for your investments, based on the arrival date. You will use these new bases to calculate gains whe nyo ueventually do sell them.

So, if done properly, any "winners" you had when you left, escape US taxation (assuming you sold after the new year), avoid cap gains altogether, on the portion of gains made before leaving US.

If you did sell some winners between august and December, you may have to reconsider filing full year, since full year would require you to report those gains, and part-year would not.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
fink08
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Joined: Wed Apr 04, 2018 11:56 pm

Post by fink08 »

wait, a loophole ... in my favour? Almost makes up for years of 8621 filing. Almost.
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
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Post by nelsona »

Didn't you live in US for all those years? What were you doing with PFICs? You should not have had any Cdn mutual funds outside your RRSP, and no Cdn brokerage accounts. So how were you holding PFICs?
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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