Dual US/CDN citizens-- tax on US equties inheritance

[schwaz]

My wife (resident of Canada) will be receiving a substantial portfolio in stocks and bonds from her US citizen mother. Half are in an IRA, the other half are in a family trust.

Will there be Canadian tax on her inheritance-- i.e., considered a deemed disposition?

If so, would same apply if portfolio is converted to cash prior to disposition but not prior her mother's passing?

[nelsona]

I will talk about the IRA:

If one inherits an IRA, there is no income or estate tax for the mother. Your wife however would have to take distributions from the IRA as income either immediately or spread over max 10 years. This distributions would be taxed in US first and Canada, with credit given on her CDn return for US tax paid.
If the mother collapses the IRA prior to death, she would include it in her income and pay tax in those years. Cash given as inheritance would not be taxable.

The trust issue is too complicated for this forum.

[schwaz]

Understood, thanks Nelsona. We always appreciate your work here!

After doing some research, my understanding regarding inheriting an equities portfolio is they're considered sold at date of death creating a new cost basis and any profit above that upon a sale is taxable.

[nelsona]

NOT in and IRA. IRA's are like RRSPs in the sense that it doesn't matter what happens inside the IRA, or what kind of investments are held , any withdrawal is 100% taxable in US (and this in Canada).

Now in a straight investment account in US (not in an IRA or any other kind of thrust), inherited by a CDn, indeed the cost basis for Cdn purposes would become the price at the time of inheritance.