US citizen in Canada - source of capital gains

[skobes]

For a US citizen living in Canada, what determines the country source of capital gains for the purpose of foreign tax credits? If I sell shares of a US company through a Canadian brokerage, is that US-source gain or Canada-source gain? (Is the answer the same for US taxes and Canadian taxes?)

Thanks!

[nelsona]

All except real estate and natural resources are sourced in the country of residence.
You report on both returns, and take credit only on form 1116 on your US return.

[skobes]

Thanks. I just found the guidance in publication 514 that supports this. But it has an interesting exception:

"U.S. citizens and resident aliens with a foreign tax home will be treated as nonresidents for a sale of personal property only if an income tax of at least 10% of the gain on the sale is paid to a foreign country."

Suppose a sale has a large gain for US taxes but a smaller gain for Canadian taxes due to the deemed acquisition rule for new residents. As a result the Canadian tax owing on it is less than 10% of the gain for US taxes. Does it then become US-sourced (and eligible for Canadian FTC)?

[nelsona]

That is referring to personal property, not stocks.

[nelsona]

The situation you describe simply means that the US will get its share of the pre-move gains, which is only fair.

[skobes]

Ok makes sense. Thanks a lot :)