Stocks & Primary Residence Sale in Emigration Year (Canada)

[genghee 5]

Hi there,

 

My parents will land in the US and activate their green cards on 4/1. Their primary concern is minimizing taxes on the sales of their stock portfolio and primary residence. My understanding is that they would become US tax residents on that day, and deemed non-residents in Canada on the same day.

 

Would appreciate feedback on my proposed plan, which is to:

(1) Sell their portfolio before 4/1, as this would have no tax impact in the US, and would be taxed as resident income in Canada without any non-resident surtax. Is this assumption correct?

(2) Sell their primary residence before 4/1 if possible, as this would have no tax impact in either US or Canada. Selling their home later in 2022 would also be ok, as it would still have no tax impact in Canada but require more paperwork to avoid withholding, and no/minimal tax impact in the US.

 

Also, my parents want to return to Canada after landing, to stay in Canada 183 days next year to qualify as full year residents for tax-filing. I don't think this makes sense because

(a) There is no significant tax benefit in doing so if we already liquidate as resident income before 4/1

(b) They would still be deemed non-resident for time after 4/1 even if they log 183 days for the year

 

Is my reasoning sound or am I missing something?

 

Thanks!

[Boiler 45,756]

If they sell their house after they move things can get messy.

[Ontarkie 14,321]

If you check the Canada forum it's been mentioned more than once to sell your house before you move. Those threads are a bit older and buried but still relevant. 

The tax hit is much high after the move as that home is no longer the primary home. 

 

 

Edited November 30, 2021 by Ontarkie

[genghee 5]

My understanding was that if you sell your primary residence in the same calendar year of your move, there is no tax incurred (but there is reporting requirements if sold after move date).  

 

Source:  https://cardinalpointwealth.com/2018/08/31/canadian-expat-principal-residence/

 

"If the property is sold while you are a non-resident of Canada, some additional analysis is required. Based on the assumptions above, the property is eligible for the principal residence exemption for any year that you own it as a Canadian resident, even if you are a Canadian resident for a portion of the year. In other words, if you were to become a non-resident of Canada in 2018, you are still able to claim the exemption for the entire 2018 tax year"

[Merica-n 65]

Not sure about the Canadian taxes, but want to point out that they should qualify for the IRC Section 121 Exclusion on Gain of Primary Residence for USA taxes if they lived in the home for 2 of the past 5 years, and it was their primary residence and never used for business or rental purposes.  This is 250k if single and 500k if filing joint return and excludes the gain up to the exclusion amount, which is (Proceeds from Sale - Purchase Price - Capital Improvements).  There is no requirement that the property be located in the USA to qualify for this exclusion.

Edited December 2, 2021 by Merica-n

[Ontarkie 14,321]

On 11/30/2021 at 12:59 PM, genghee said:

My understanding was that if you sell your primary residence in the same calendar year of your move, there is no tax incurred (but there is reporting requirements if sold after move date).  

 

Source:  https://cardinalpointwealth.com/2018/08/31/canadian-expat-principal-residence/

 

"If the property is sold while you are a non-resident of Canada, some additional analysis is required. Based on the assumptions above, the property is eligible for the principal residence exemption for any year that you own it as a Canadian resident, even if you are a Canadian resident for a portion of the year. In other words, if you were to become a non-resident of Canada in 2018, you are still able to claim the exemption for the entire 2018 tax year"

I sold mine before leaving. I just know what others found out after they sold their home after they moved and wish they sold before the move.