Here is another question. I was actually quite surprised not to find an answer searching this forum or the web, as I thought it should be a pretty common issue.
I have sold some of my (non-RRSP) Canadian mutual funds for the first time since I became a permanent US resident. I did not find any discussion of my case in IRS publications. My best guess is that I should use the exchange rate in effect at the dates I made my mutual fund purchases to compute the USD cost basis for my US return. The consequence in a couple of cases is that I have a loss in CAD and a gain in USD, because of the difference in exchange rates between when I bought and sold the funds.
That seems a little strange, especially because the overall USD-only gain is really not a capital gain on the fund, but on the currency exchange, and I don't understand the rationale for using the date of my funds purchase as the time to compute the "cost basis" of my Canadian currency (these funds started their life as CAD currency, so their cost-basis is rather undeterminate).
US cost basis of Canadian mutual fund for capital gains tax
Moderator: Mark T Serbinski CA CPA
I was researching that some more and realized, which makes a lot of sense given the deemed disposition by Canada when I left, that the cost basis for the gains in the US is the value of the funds at the time of the deemed disposition (thus avoiding double taxation as per the treaty).
This might help a little, but the fact remains that there will be a gain to these funds in USD, caused by the difference in exchage rates between when I became a US resident and when I sold them, so I am still interested in comments on this issue.
This might help a little, but the fact remains that there will be a gain to these funds in USD, caused by the difference in exchage rates between when I became a US resident and when I sold them, so I am still interested in comments on this issue.
I have reported several times (the search utility in this board is very limited due to a transition a few months ago) on how to determine cost for sales of intstruments bought befoire departure from Canada and sold after entry into US..
On Sept 18, 2000 the US and Canada agreed that for a Cdn resident moving to US, the taxpayer had the choice to use either the normal cost basis (just like any other US taxpayer), or use the deemed dispostion value used on departure from canada.
This is NOT yet in the treaty, so reference would have to be made to the agreement. You are not obliged to use this (for example if your cost was higer than your deemed dispo value), but it is your option on a case by case basis.
Previous to the agreement, the remedy was to go back to your last Cdn exit return and request a foreign tax credit for the uS tax you would have paid on the pre-deaprture gains (very complex). This is still the way that it must be done with many other countries who have not come to an agreement with Canada on this issue.
On your other point. For all foreign commodities, the change in exchange rate is aprt and parcel of the cap gains. in truth, if you converted $50K of Cdn into US that you've held for 4 years, you should be declaring and paying cap gains on this.
So, yes, your gain/loss must take into account the exchange rate on the day you bought (and/or received distributions affecting your cost basis) or on the deemed disposition day you left Canada, as well as the exchange rate on the day you sold.
On Sept 18, 2000 the US and Canada agreed that for a Cdn resident moving to US, the taxpayer had the choice to use either the normal cost basis (just like any other US taxpayer), or use the deemed dispostion value used on departure from canada.
This is NOT yet in the treaty, so reference would have to be made to the agreement. You are not obliged to use this (for example if your cost was higer than your deemed dispo value), but it is your option on a case by case basis.
Previous to the agreement, the remedy was to go back to your last Cdn exit return and request a foreign tax credit for the uS tax you would have paid on the pre-deaprture gains (very complex). This is still the way that it must be done with many other countries who have not come to an agreement with Canada on this issue.
On your other point. For all foreign commodities, the change in exchange rate is aprt and parcel of the cap gains. in truth, if you converted $50K of Cdn into US that you've held for 4 years, you should be declaring and paying cap gains on this.
So, yes, your gain/loss must take into account the exchange rate on the day you bought (and/or received distributions affecting your cost basis) or on the deemed disposition day you left Canada, as well as the exchange rate on the day you sold.
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