My question is: Applicable to both US and Canada
QUESTION: I hold dual citizenship. Born in Canada, naturalized in the US.I
have lived in the USA for 17 years. I'm thinking of moving my permanent
residence back to Canada. What are the tax implications with the USA (and
for that matter Canada) of making this move. Specifically, can I move all my
financial assets to Canada without paying tax to the USA?
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david ingram replies:
This is a good question.
Because the US requires you to file a US return for the rest of your life or
as long as you remain a US citizen, there is no deemed disposal of your
assets. However, if you were still a green card holder and returned to
Canada and gave up your Green card after being there 8 years, there would be
a deemed disposal of your assets and you would be liable on that departing
tax return to pay tax on any capital gains realized because of the pretend
sale. There is also a deemed disposal and tax to pay if you decide to
renounce your US citizenship.
No matter what you do with the US, at the same time, there is a deemed
acquisition price for Canada - Everything you owned is revalued as you cross
the border and you do need to deal with the values and KEEP a record. In a
similar situation the CCRA has sent me a letter today demanding documentary
proof of the value of a piece of property in April, 1988 when someone
crossed the border.
This deemed acquisition is hard to understand sometimes. Forget about
exchange rates in the following examples.
What it means is that if you owned a share of XYZ that you paid $100 for and
it was worth $150 when you entered Canada, and you sold it for $200, the US
would tax you on $100 and Canada on $50.00 profit.
At the same time, if you paid $200 for a stock ABC and it was worth $100
when you crossed the border and you sold it for $200, you would owe Canada
tax on $100 and nothing to the US .
Each item has to be valued including antiques, old cars, etc. For instance,
I have a 1953 Chevrolet which is worth between $15,000 and $20,000. It will
only go up in value so I would want an appraisal on it.
Another client has had his Steinway grand piano go up substantially and now
that he ahs passed away, the value when he brought it to Canada is important
because it is deemed to be sold on the date of death.
When you move all your financial assets to Canada, you will then pay tax to
Canada first and then report the income again on your US 1040. You will
claim foreign tax credits on schedule 1116 with your 1040.
david ingram
Hope this helps you.
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