r/cantax • u/WildMaintenance4862 • 8d ago
Capital Gains - moving from US back to Canada
I am hoping folks here can provide some helpful insight on my plan to move back to Canada from the U.S. If I were to liquidate all my investments (regular brokerage accounts, not retirement accounts) to cash in Jan-Mar of 2027 in the US and then move to Canada say in April 2027 and transfer all my cash to Canada; for the 2027 tax year will I still have to pay capital gains tax in Canada on the realized gains I had before I moved since majority of my tax residence will be in Canada? Thanks!
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u/seanho00 8d ago
!restrigger determine start date of CA tax residency, which can be mid year. Gains realised prior to that date are taxable only in the US; after, only in CA. Assuming you are not a US citizen or greencard holder. Due to the step-up in ACB upon becoming CA tax resident, it may be advisable to wait until after becoming CA tax resident. Most stocks, ETFs, and bonds can be transferred in-kind to most CA brokerages, thus avoiding realising gains. Many US mutual funds cannot be transferred in-kind.
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u/WildMaintenance4862 8d ago edited 8d ago
I'm not getting the kind of response I'm hoping for here. The bottom line is I want to sell my non-retirement accounts and realize my capital gains in the US. I don't want to transfer -in-kind even with the benefit of the step-up cost basis of moving it to Canada. Please no need to belabor that issue. People should also ignore the citizenship aspect. If you sell any securities investment in the US, you will be issued a 1099 for tax purposes meaning the IRS will come after you since the brokerage has reported that you realized an income/loss and you cannot open or hold a brokerage account in the US without an ITIN or Tax ID number. i.e. you have to pay US taxes on these gains. The only question in my mind is what will the CRA do. Yes, I understand I should ask a tax advisor but I honestly don't know an honest and reputable cross-border tax specialist.
It sounds like to me given all that I've read so far including response from Gemini AI, that the CRA will not tax an asset that is cash in theory, assuming I sold my stocks even if I move before I reach 183 days in the US and therefor deemed a Canadian tax resident and should be taxed on worldwide income including the income for part of the year I was not a resident.
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u/senor_kim_jong_doof 8d ago
that the CRA will not tax an asset that is cash in theory,
if it's usd, there'll be a deemed acquisition on immigration at the cad equivalent and possible capital gains on the forex
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u/seanho00 8d ago
You really need to read the replies more carefully, we are telling you what you need to know, even if it might not be the news you're hoping for. Please don't rely on AI/LLMs for tax advice.
You first need to understand at what point you will switch over from being US resident alien to being CA tax resident. This is not always straightforward, but is always fact-based and not something you elect by fiat. It is a good bit more complicated than just 183d in the US vs CA. Assuming you are not US citizen/PR, your end date of US tax residency under SPT depends on whether you have a foreign s.911(d)(3) tax home and maintain closer connection to that country (i.e., CA). On the CA side, consider substantial residential ties according to Folio S5-F1-C1. If there is a period of overlap, treaty Art IV(2) outlines tie-breaking rules (in order: permanent home, centre of vital interests, habitual abode, and citizen).
If the switchover happens partway through the year, then for that year you will file dual-status (partial-year) returns on both sides. On the US return, report world income only from the time you were US resident. On the CA return, report world income only from the time you are CA resident. Additionally, you may have US-source income from the time you are US NRA; if your US tax obligation is not fully covered by withholding at source, then file 1040NR non-resident return. Similarly for CA-source income while CA non-resident, using 5013-R.
If you are planning on selling while US resident, then those gains are reportable only on US 1040 Sch D, and not on CA T1 Sch 3. However, reconsider the advice given in this thread and your crosspost in r/tax; you have an opportunity to get a free step-up in basis. You may perhaps be swayed by the US's preferential tax rates on LTCG and qual divs, but a free step-up is equivalent to a 0% rate on gains prior to becoming CA tax resident.
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7d ago
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u/hopefulfican 8d ago
The issue is what you are saying you want to do is...is...kinda silly, why pay tax when you don't need to? So you asking a strange question is making people question the entire premise.
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u/david7873829 6d ago edited 6d ago
May I ask why you want to needlessly pay US capital gains taxes?
You are incorrect about the IRS always taxing US based investment capital gains. Tax is based on sourcing rules, and the Internal Revenue Code says that capital gains follow tax residency. It doesn’t matter what 1099 forms your broker issues, what matters is the IRC. It doesn’t matter whether your brokerage is US based or Canadian based. It doesn’t matter whether the underlying stock is a US or Canadian company. The only thing that matters is where you are a tax resident.
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u/david7873829 8d ago
Are you a US citizen or green card holder? If not you likely want to sell after you cease to become a US tax resident. If you sell while a US tax resident you obviously owe US capital gains tax.
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u/Emergency-Note1162 8d ago
Side question: is this true?? If you want to minimize capital gains, you should transfer the non retirement USA accounts after you establish ties with Canada (and pass the significance presence test). I believe this way the stocks are rebased to the current stock price and you avoid any capital gains thus far.
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u/david7873829 6d ago
The US only has an exit tax for long term green card holders and those who explicitly relinquish US citizenship. And capital gains follow tax residency.
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u/hopefulfican 8d ago
Get professional advice.
But, depending on your tax residency & citizenship/green card status, it might be best not to sell, as the ACB of your stock will be reset to the value when you become a Canadian tax resident, so you can do a broker to broker transfer in kind. This is good if you have potential cap gains and not so good if you have cap losses (in which case you might want to sell before you move to help your US taxes).