I am a US Citizen living/working in Canada since February 2, 2006. I work for an aerospace company and was transferred for this position. My work permit has the remarks “Intra-Company Transfereeâ€on it.
I recently purchased two rental properties in Missouri. I was advised that I will be required to pay capital gains taxes to Canada when I move back to the US. Is this correct? If so how will the capital gains tax be calculated? I am concerned since I only paid $5000 for this property and then spent another $40,000 to completely remodel/rebuild the property.
I have an online stock market account that I use to purchase stocks in the US.
I am being told that I will be required to pay capital gains taxes on stocks/bonds/ that I have purchased while living in Canada when I move back to the US. Is this correct?
US Citizen living/working in Canada
Moderator: Mark T Serbinski CA CPA
Yes to both. The moment you leave canada, all investments except Cdn real estate and sheltered accounts, become deemed sold.
This is known as demed disposition on departure from Canada.
You will be allowed to pretend to make the same sale in US so that yoy can use the Cdn tax to offset the US tax, and 're-zero" your cost basis.
This is known as demed disposition on departure from Canada.
You will be allowed to pretend to make the same sale in US so that yoy can use the Cdn tax to offset the US tax, and 're-zero" your cost basis.
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
Some other thoughts:
1) did you acquire the properties before moving to Canada? If so then I think CRA would recognize them as having a fair market value on the day you took up residence in Canada. In which case your capital gain will only be the difference between the FMV when you moved to Canada and the FMV when you leave.
2) you should be able to adjust your basis by the value of improvements you made to the properties, thus reducing the gain. This is true whether you bought them before or after you moved to Canada.
3) I think if you are renting out those properties, then that rental income would need to be included on your Canadian tax returns while you are resident in Canada.
4) I also think the same concepts apply to your US based investment account. I.e., if you owned it before you moved to Canada, it would be attributed a FMV on the day you moved for Canadian tax purposes, and you need to include any income (interest, dividends) generated in that account every year on your Canadian tax returns. Plus any capital gains from selling stocks would need to be included, but only to the extent they are gains from the FMV on the date of moving into Canada.
5) you also need to include all of these things on your US taxes, but you may get some foreign tax credits which you can apply.
I think this is right, but if I goofed up here, maybe nelsona will correct me.
1) did you acquire the properties before moving to Canada? If so then I think CRA would recognize them as having a fair market value on the day you took up residence in Canada. In which case your capital gain will only be the difference between the FMV when you moved to Canada and the FMV when you leave.
2) you should be able to adjust your basis by the value of improvements you made to the properties, thus reducing the gain. This is true whether you bought them before or after you moved to Canada.
3) I think if you are renting out those properties, then that rental income would need to be included on your Canadian tax returns while you are resident in Canada.
4) I also think the same concepts apply to your US based investment account. I.e., if you owned it before you moved to Canada, it would be attributed a FMV on the day you moved for Canadian tax purposes, and you need to include any income (interest, dividends) generated in that account every year on your Canadian tax returns. Plus any capital gains from selling stocks would need to be included, but only to the extent they are gains from the FMV on the date of moving into Canada.
5) you also need to include all of these things on your US taxes, but you may get some foreign tax credits which you can apply.
I think this is right, but if I goofed up here, maybe nelsona will correct me.
As steve said, any investemnt you held at the time you moved to Canada was alos subject to deemed acquisition, which would preclude you paying Cdn tax on gains made before arrival in canada. The basic principle is that you will need to pay Canada cap gains tax on any gains incurred while a resident of canada.
You said you 'recently' bought property in MO, which to me means while you were living in Canada.
You will need a Fair market value assessment on this property when you return to US. YOue exenses incurred to upgrade the property will be added to your cost basis, of course.
You said you 'recently' bought property in MO, which to me means while you were living in Canada.
You will need a Fair market value assessment on this property when you return to US. YOue exenses incurred to upgrade the property will be added to your cost basis, of course.
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