Moving Back from US, Impact on US Travel?

[pleventi]

Hi,

From my reading on dual-status tax years, I am allowed to spend up to 10 days in the US after my exit date without it impacting my exit date for US tax purposes.

If I elect to file as a full-year resident, then I *think* my exit date for US purposes will still matter in the event of capital gains. E.g. a sale of security after I exit country, if I visit for >10 days later on, would now be US sourced. For normal income, it shouldn't matter since the sourcing is based on where I conduct the business, not where I reside, right?

Clearly the 10 day rule will matter greatly in the event I elect to file a dual-status return, since it could shift events latter in the year to be US taxable.

Thanks,
Paul

[nelsona]

If you file full year, you are making your exit date dec 31. No question of that. As well, filing full year means you cannot use the treaty provision related to capital gains being taxed only in the country of residence. Of that I'm quite sure.

If you decide to file part-year however, as cdn, you are not subject to counting days. You are Cdn resident by treaty the day you go back. So you will know what your US income will be on your 1040 and your 1040NR, regardless of how many days after departure you spend in US. Pub 519 hardly applies to Cdns using the treaty.

If you file full year, sourcing of your income only matters in terms of forsifb tax credit or foreign eranedd income exclusion.

The reason -- if you file full year 1040 -- that you will have to wait until 2012 to trigger your cap gains is that you will have little or no Cdn tax to write off against your cap gains (due to demmed acquisition rules), so best to waiy until you don't have to report them in US at all -- in 2012.

[pleventi]

Thanks. Keep forgetting to check the treaty... good tidbit about 10 day rule not mattering for dual-status Canadians.

So if I crystallize my gain pre-move, I'm subjecting myself to 15% federal + 9ish% (minus 3% credit) CA state tax, which is not good.

If I crystallize post-move and elect full year 1040, I subject myself to 15% fed tax, but roughly no impact on CA tax (it is computed on whole year but adjusted by fraction of income earned while in state vs out of state), which is still better than selling pre-move.

If I crystallize post-move and go dual-status 1040/1040NR, then I lose out on MFJ and some credits, but essentially am not taxed on my capital gain.

And as you suggest, best bet is to hold off until 2012 if possible, and laugh all the way to the bank.

Cheers,
Paul

[nelsona]

Very well stated.

Remember to sell any losers before leaving Cali.