I'm a Canadian who has been working in the US for several years under a green card. I'm planning to move back to Canada in the next several years and have begun researching some of the tax implications. I understand that when I move back and give up my green card, I will be deemed to have acquired my property at the then-FMV and my cost basis will reset. Most of my non-retirement (i.e. taxable) assets are in Vanguard funds (e.g., VTIVX) that I do not believe can be converted to an ETF that is available in Canada.
If I continue to hold these funds until I move back to Canada (rather than sell now and convert to an ETF that is available in Canada, but thereby incurring capital gains), will I be able to take advantage of the deemed acquisition rule by selling the funds after I move? In other words, if I continue hold VTIVX and eventually move to Canada, would I then be able sell to VTIVX once back in Canada with a revised cost basis of the FMV as of the date that I move?
I realize that once I move Vanguard will not let me continue to trade in a Vanguard US account, but as long as I can sell the funds from Canada (and then convert to CAD and wire the money to Canada) I don't see that being a problem. Also, FWIW, I anticipate my total capital gains will be less than the $600,000+ threshold for being subject to the US expatriate tax.
Thanks in advance for your help!
US Resident Moving to Canada - Deemed Acquisition Question
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Re: US Resident Moving to Canada - Deemed Acquisition Question
Welcome to FWF. I cannot provide any specific knowledge on your questions but I know there are others here who have experience in these matters.
You might also want to review our wiki article, Cross-border and expatriate issues, that covers some of the logistics that you might need to consider.
You might also want to review our wiki article, Cross-border and expatriate issues, that covers some of the logistics that you might need to consider.
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Re: US Resident Moving to Canada - Deemed Acquisition Question
Your current assets will have an ACB set at the FMV on the date you enter Canada for the purposes of CRA and Canadian taxation, and anything you sell once in Canada will use that ACB as the cost base for cap gains/loss purposes. I have no idea how the IRS will treat those assets once you sell them, or upon leaving the country, but I doubt very much that you can escape cap gains taxes in the USA on the capital growth of those assets.
You need to talk to a International tax accountant well before you leave the USA so you know what order of tactics will serve you best. There are a few people on the forum which have more expertise in this matter.
I know that when I was an ex-pat the other way in 2003, going to the USA, IRS would have taxed me on the basis of what my actual Canadian cost base was at the time of acquisition, not at the FMV when I entered the USA. So I made a point of selling any Canadian assets I was not sure I'd want to keep while I was a tax resident of the USA and made sure I didn't sell any of my Canadian assets (in taxable accounts) while I was a tax resident in the USA.
The tax treaty has changed since that time as well, so I have no expertise in the matter.
You need to talk to a International tax accountant well before you leave the USA so you know what order of tactics will serve you best. There are a few people on the forum which have more expertise in this matter.
I know that when I was an ex-pat the other way in 2003, going to the USA, IRS would have taxed me on the basis of what my actual Canadian cost base was at the time of acquisition, not at the FMV when I entered the USA. So I made a point of selling any Canadian assets I was not sure I'd want to keep while I was a tax resident of the USA and made sure I didn't sell any of my Canadian assets (in taxable accounts) while I was a tax resident in the USA.
The tax treaty has changed since that time as well, so I have no expertise in the matter.
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Re: US Resident Moving to Canada - Deemed Acquisition Question
You may have more IRS problems than you think. If you're a "covered expatriate" (easiest test: net worth > US$2MM), you:
a) have to file Form 8854 with a final 1040 after you give up the green card; failure to file is bad, bad, bad,
b) pay capital gains taxes as if all assets are sold, per your allusion to being under the $600k exemption (which is now nearer $700k), so you're probably okay, and
c) treat tax deferred accounts like 401(k) and IRAs as fully taxable income on the expatriation date and pay the piper.
c) is very bad for a lot of covered expatriates. Be careful.
a) have to file Form 8854 with a final 1040 after you give up the green card; failure to file is bad, bad, bad,
b) pay capital gains taxes as if all assets are sold, per your allusion to being under the $600k exemption (which is now nearer $700k), so you're probably okay, and
c) treat tax deferred accounts like 401(k) and IRAs as fully taxable income on the expatriation date and pay the piper.
c) is very bad for a lot of covered expatriates. Be careful.
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