Capital gains of a public company


R

random

Hi,

I am a Canadian living in the US. I am deemed canadian resident (I
believe) so I have to file Can taxes. I lived the last year entirely in
the US. Now I have some canadian brokerage accounts. And I have
dividends in those accounts. The dividends come from US public
companies. So who do I have to pay tax to for that? Canada? or US?

thanks
Anthony
 
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A

AGN

random said:
Hi,

I am a Canadian living in the US. I am deemed canadian resident (I
believe) so I have to file Can taxes. I lived the last year entirely in
the US. Now I have some canadian brokerage accounts. And I have
dividends in those accounts. The dividends come from US public
companies. So who do I have to pay tax to for that? Canada? or US?

thanks
Anthony
If indeed you are a factual Canadian resident (don't use "deemed" Cdn
resident: this is reserved mostly for Gov't employees abroad) then you
pay cap gains taxes in Canada alone.

You should be looking at whether you truly are a Cdn resident, since
-- unless you have a full-time home or dependants in Canada -- you are
most likely a non-resident of Canad or, at worst, a "deemed
non-resident", and should not be having to pay Cdn/Prov income tax on
your US income, not having to report cap gains (be they from Cdn or US
investments) in canada.
 
F

Fred Grosby

If indeed you are a factual Canadian resident (don't use "deemed" Cdn
resident: this is reserved mostly for Gov't employees abroad) then you
pay cap gains taxes in Canada alone.

You should be looking at whether you truly are a Cdn resident, since
-- unless you have a full-time home or dependants in Canada -- you are
most likely a non-resident of Canad or, at worst, a "deemed
non-resident", and should not be having to pay Cdn/Prov income tax on
your US income, not having to report cap gains (be they from Cdn or US
investments) in canada.
Reference:

http://www.ccra-adrc.gc.ca/E/pub/tp/it221r3-consolid/it221r3-consolid-e.html

There are all sorts of gotchas there that Canadians living abroad
should know about. Among them:

"Where an individual is determined not to be factually resident in
Canada, he or she may still be *deemed* to be resident in Canada for
tax purposes by virtue of subsection 250(1) of the Act (see ¶s
19-23)." [Emphasis added]

"Secondary residential ties that will be taken into
account in determining the residence status of an individual while
outside Canada are

(a) personal property in Canada (such as furniture, clothing,
automobiles and recreational vehicles),

(b) social ties with Canada (such as memberships in Canadian
recreational and religious organizations),

(c) economic ties with Canada (such as employment with a Canadian
employer and active involvement in a Canadian business, and Canadian
bank accounts, retirement savings plans, credit cards, and securities
accounts),

[...]

(e) hospitalization and medical insurance coverage from a province or
territory of Canada,

(f) a driver's license from a province or territory of Canada,

(g) a vehicle registered in a province or territory of Canada,

(h) a seasonal dwelling place in Canada or a leased dwelling place ...

[...]

(j) memberships in Canadian unions or professional organizations.

9. Other residential ties that the Courts have considered in
determining the residence status of an individual while outside
Canada, and which may be taken into account by the CCRA, include the
retention of a Canadian mailing address, post office box, or safety
deposit box, personal stationery (including business cards) showing a
Canadian address, telephone listings in Canada, and local (Canadian)
newspaper and magazine subscriptions. These
residential ties are generally of limited importance except when taken
together with other residential ties, ..."

I recall reading the story of a Canadian living and working in England
who was deemed a resident of Canada for tax purposes based on a post
office box where she received subscriptions to Canadian magazines and
communications from the Canadian labor union to which she belonged.

Best advice for Canadians contemplating or actually living abroad: DO
NOT EVER!!! fill out and submit to CCRA Form NR73, Determination of
Residency Status (Leaving Canada), or Form NR74, Determination of
Residency Status (Entering Canada). Not only is it like waving a red
flag in front of a bull, it's giving CCRA the rope with which they
will try to hang you.
 
A

AGN

If indeed you are a factual Canadian resident (don't use "deemed" Cdn
resident: this is reserved mostly for Gov't employees abroad) then you
pay cap gains taxes in Canada alone.

You should be looking at whether you truly are a Cdn resident, since
-- unless you have a full-time home or dependants in Canada -- you are
most likely a non-resident of Canad or, at worst, a "deemed
non-resident", and should not be having to pay Cdn/Prov income tax on
your US income, not having to report cap gains (be they from Cdn or US
investments) in canada.
Reference:

http://www.ccra-adrc.gc.ca/E/pub/tp/it221r3-consolid/it221r3-consolid-e.html

There are all sorts of gotchas there that Canadians living abroad
should know about. Among them:

"Where an individual is determined not to be factually resident in
Canada, he or she may still be *deemed* to be resident in Canada for
tax purposes by virtue of subsection 250(1) of the Act (see ¶s
19-23)." [Emphasis added]
Yeah, and "deemed" is reserved for Gov't employees abroad like I said,
and for "sojourners (spending 183 days in canada) which our poster
could not have done since it was staed that they spent entire year in
US.

Unless he works for the Gov't, only the "house and/or spouse" rule can
force him to be considered a FACTUAL Cdn resident, since his
ovewrwhelming vital interests are clearly in US.
"Secondary residential ties that will be taken into
account in determining the residence status of an individual while
outside Canada are

(a) personal property in Canada (such as furniture, clothing,
automobiles and recreational vehicles),

(b) social ties with Canada (such as memberships in Canadian
recreational and religious organizations),

(c) economic ties with Canada (such as employment with a Canadian
employer and active involvement in a Canadian business, and Canadian
bank accounts, retirement savings plans, credit cards, and securities
accounts),

[...]

(e) hospitalization and medical insurance coverage from a province or
territory of Canada,

(f) a driver's license from a province or territory of Canada,

(g) a vehicle registered in a province or territory of Canada,

(h) a seasonal dwelling place in Canada or a leased dwelling place ...

[...]

(j) memberships in Canadian unions or professional organizations.

9. Other residential ties that the Courts have considered in
determining the residence status of an individual while outside
Canada, and which may be taken into account by the CCRA, include the
retention of a Canadian mailing address, post office box, or safety
deposit box, personal stationery (including business cards) showing a
Canadian address, telephone listings in Canada, and local (Canadian)
newspaper and magazine subscriptions. These
residential ties are generally of limited importance except when taken
together with other residential ties, ..."

I recall reading the story of a Canadian living and working in England
who was deemed a resident of Canada for tax purposes based on a post
office box where she received subscriptions to Canadian magazines and
communications from the Canadian labor union to which she belonged.

Best advice for Canadians contemplating or actually living abroad: DO
NOT EVER!!! fill out and submit to CCRA Form NR73, Determination of
Residency Status (Leaving Canada), or Form NR74, Determination of
Residency Status (Entering Canada). Not only is it like waving a red
flag in front of a bull, it's giving CCRA the rope with which they
will try to hang you.


....anyhoo...

As to dividends, because you spend so much time in US you no doubt
have to file as a US resident (regardl;ess of your Cdn tax status).
Thus you will have to report dividends in both countries. If the
dividends are from US firms, then you can clim a tax credit on your
Cdn return for tax paid on those dividends in US.

If the dividends are from Cdn corps, then the foreign tax credit would
be on your 1040. (form 1116).

You see why you want to establish which country you are resident of,
and then make your filing much more simple?
 
F

Fred Grosby

[email protected] (Fred Grosby) wrote in message news: said:
Hi,

I am a Canadian living in the US. I am deemed canadian resident (I
believe) so I have to file Can taxes. I lived the last year entirely in
the US. Now I have some canadian brokerage accounts. And I have
dividends in those accounts. The dividends come from US public
companies. So who do I have to pay tax to for that? Canada? or US?

thanks
Anthony

If indeed you are a factual Canadian resident (don't use "deemed" Cdn
resident: this is reserved mostly for Gov't employees abroad) then you
pay cap gains taxes in Canada alone.

You should be looking at whether you truly are a Cdn resident, since
-- unless you have a full-time home or dependants in Canada -- you are
most likely a non-resident of Canad or, at worst, a "deemed
non-resident", and should not be having to pay Cdn/Prov income tax on
your US income, not having to report cap gains (be they from Cdn or US
investments) in canada.
Reference:

http://www.ccra-adrc.gc.ca/E/pub/tp/it221r3-consolid/it221r3-consolid-e.html

There are all sorts of gotchas there that Canadians living abroad
should know about. Among them:

"Where an individual is determined not to be factually resident in
Canada, he or she may still be *deemed* to be resident in Canada for
tax purposes by virtue of subsection 250(1) of the Act (see ¶s
19-23)." [Emphasis added]
Yeah, and "deemed" is reserved for Gov't employees abroad like I said,
Cite your source, please.
and for "sojourners (spending 183 days in canada) which our poster
could not have done since it was staed that they spent entire year in
US.

Unless he works for the Gov't, only the "house and/or spouse" rule can
force him to be considered a FACTUAL Cdn resident, since his
ovewrwhelming vital interests are clearly in US.
Cite your source, please.
 
A

Alan Bowler

random said:
Hi,

I am a Canadian living in the US. I am deemed canadian resident (I
believe) so I have to file Can taxes. I lived the last year entirely in
the US. Now I have some canadian brokerage accounts. And I have
dividends in those accounts. The dividends come from US public
companies. So who do I have to pay tax to for that? Canada? or US?
You really should investigate more closely whether you really are
considered a resident of Canada for tax purposes. If you are, then
you will have to file tax returns in both countries reporting ALL
your income worldwide including those dividends. The net effect
will be that you will pay taxes to both governments on those dividends
(and other income). However, this will not amount to double taxation,
rather the two governments will split the total tax (probably about
50/50 although the exact effective split will vary with circumstances.)
Note that since you received the dividends in a Canadian account, the
odds are good that the IRS has already collected its share as
withholding tax of 15% before the cash was deposited in your account,
you will likely owe about another 15% to CCRA when you file next April.
(I.e. the total tax will be the same as if you were were still only
a Canadian resident.)

The exact details of your filings will be somewhat complicated,
and it is probably worthwhile to get help from a professional to walk
you through the specifics the first year.

Whether you want to maintain your status as deemed Canadian resident
is a complicated question. Among other things when you cease being
a resident, those shares will be deemed to be sold, any currently
unrealized capital gains will be crystallized, and Canadian income taxes
will be due on those gains.
 
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A

Alan Baggett

You really should investigate more closely whether you really are
considered a resident of Canada for tax purposes. If you are, then
you will have to file tax returns in both countries reporting ALL
your income worldwide including those dividends.
I don't think this statement is quite correct.

You would only have to declare your worldwide income on the tax return
for the country that you are deemed to be a resident of.

For any other country you would only be responsible for declaring the
income you earned within its borders. One country can not tax a
non-resident for income earned in another nation.
 
A

AGN

[email protected] (Fred Grosby) wrote in message news: said:
(e-mail address removed) (AGN) wrote:

Hi,

I am a Canadian living in the US. I am deemed canadian resident (I
believe) so I have to file Can taxes. I lived the last year entirely in
the US. Now I have some canadian brokerage accounts. And I have
dividends in those accounts. The dividends come from US public
companies. So who do I have to pay tax to for that? Canada? or US?

thanks
Anthony

If indeed you are a factual Canadian resident (don't use "deemed" Cdn
resident: this is reserved mostly for Gov't employees abroad) then you
pay cap gains taxes in Canada alone.

You should be looking at whether you truly are a Cdn resident, since
-- unless you have a full-time home or dependants in Canada -- you are
most likely a non-resident of Canad or, at worst, a "deemed
non-resident", and should not be having to pay Cdn/Prov income tax on
your US income, not having to report cap gains (be they from Cdn or US
investments) in canada.

Reference:

http://www.ccra-adrc.gc.ca/E/pub/tp/it221r3-consolid/it221r3-consolid-e.html

There are all sorts of gotchas there that Canadians living abroad
should know about. Among them:

"Where an individual is determined not to be factually resident in
Canada, he or she may still be *deemed* to be resident in Canada for
tax purposes by virtue of subsection 250(1) of the Act (see ¶s
19-23)." [Emphasis added]
Yeah, and "deemed" is reserved for Gov't employees abroad like I said,
Cite your source, please.
The vey document you referred to: para. 19-23!
Cite your source, please.

The Us_Canadian tax treaky "Residency clause" which refers to "centre
of vital interests" tie-breaker, when a taxpayer is viewed as a
resident of both countries.

Not like it matters to you.
 
F

Fred Grosby

[email protected] (Fred Grosby) wrote in message news: said:
(e-mail address removed) (Fred Grosby) wrote in message (e-mail address removed) (AGN) wrote:

Hi,

I am a Canadian living in the US. I am deemed canadian resident (I
believe) so I have to file Can taxes. I lived the last year entirely in
the US. Now I have some canadian brokerage accounts. And I have
dividends in those accounts. The dividends come from US public
companies. So who do I have to pay tax to for that? Canada? or US?

thanks
Anthony

If indeed you are a factual Canadian resident (don't use "deemed" Cdn
resident: this is reserved mostly for Gov't employees abroad) then you
pay cap gains taxes in Canada alone.

You should be looking at whether you truly are a Cdn resident, since
-- unless you have a full-time home or dependants in Canada -- you are
most likely a non-resident of Canad or, at worst, a "deemed
non-resident", and should not be having to pay Cdn/Prov income tax on
your US income, not having to report cap gains (be they from Cdn or US
investments) in canada.

Reference:

http://www.ccra-adrc.gc.ca/E/pub/tp/it221r3-consolid/it221r3-consolid-e.html

There are all sorts of gotchas there that Canadians living abroad
should know about. Among them:

"Where an individual is determined not to be factually resident in
Canada, he or she may still be *deemed* to be resident in Canada for
tax purposes by virtue of subsection 250(1) of the Act (see ¶s
19-23)." [Emphasis added]

Yeah, and "deemed" is reserved for Gov't employees abroad like I said,
Cite your source, please.
The vey document you referred to: para. 19-23!
You are misinterpreting the document in question. It's easy to do.
The Us_Canadian tax treaky "Residency clause" which refers to "centre
of vital interests" tie-breaker, when a taxpayer is viewed as a
resident of both countries.
Okay as to factual residency, not Okay as to deemed residency.

You really should take a look at some of the case law on the subject.
Tings aren't as cut and dried as you make them out to be.
Not like it matters to you.
Well, since you have now evidenced an obvious prejudice, there's no
further point in bothering with you.

Have a nice day.
 
A

AGN

I don't think this statement is quite correct.

You would only have to declare your worldwide income on the tax return
for the country that you are deemed to be a resident of.

If one has not been careful about one's affairs, one could indeed be
subject to REPORTING income (not necessarily paying income tax in two
countries).
A cdn resident who spends 183 days in US (even on several vactains) is
ABSOLUTELY required to report their income in US, as well as canada.

The treaty wold (might) relieve the tax burden, but not the reporting
burden.
 
A

Alan Bowler

Alan said:
I don't think this statement is quite correct.

You would only have to declare your worldwide income on the tax return
for the country that you are deemed to be a resident of.

For any other country you would only be responsible for declaring the
income you earned within its borders. One country can not tax a
non-resident for income earned in another nation.
True. But not quite relevant. It is possible, to be deemed a resident
in both Canada and the US in the same tax year(s), and so have to
declare world income to both tax authorities. This is such a case, he
is clearly a resident of the US, and he stated that he believes that he
still has "sufficient ties" that he is still "deemed" a resident of Canada.

Tax filings are a lot easier if you are resident of a single country,
and that is one good reason to try and cease being a Canadian resident.
However, maintaining Canadian residency has its advantages also.
Deferal of capital gains taxes is just one of these.
 
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R

random

Ok thanks for the many replies folks. I did as you told me and checked
my status: it is deemed NON-resident. Sorry for the massive confusion.

So back to my original question: how does the IRS/CCRA collect their
taxes for dividends? Alan seems to have said that the country where the
company belongs already collected taxes on their dividends. That makes
sense because I have taxes withheld already in my Cdn brokerage
statement under the category foreign taxes. Recall the stock is an
american company. Now I am clear....

Where can I get info on this 15% (that Alan said) that the IRS collects.

Also a second question.

With my deemed non-resident status. Can I buy a house in Cdn and not pay
capital gains when I sell the house and buy another house? I want it
to be my primary residence even though I don't live there...... my folks
will live there.

thanks for the wealth of info folks
Anthony
 
A

Alan Bowler

random said:
Ok thanks for the many replies folks. I did as you told me and checked
my status: it is deemed NON-resident. Sorry for the massive confusion.
Note that you probably have to do a final tax filing with CCRA for the
period up to the time you ceased to be a resident, and report accrued
capital gains on assets (like these stocks). I.e. you treat them as if
you sold them at fair market value on the date you ceased to be a
Canadian resident. Use those values as you cost base for future US filings.
So back to my original question: how does the IRS/CCRA collect their
taxes for dividends? Alan seems to have said that the country where the
company belongs already collected taxes on their dividends. That makes
sense because I have taxes withheld already in my Cdn brokerage
statement under the category foreign taxes. Recall the stock is an
american company. Now I am clear....

Where can I get info on this 15% (that Alan said) that the IRS collects.
As you observed, the amounts have been reported to you as "foreign
taxes" on your brokerage statements. How you actually report this
to the IRS I have no clue. As I said before talk to a pro the first
year.

Note that the US regulators are aggressive about enforcing the rule
that foreign brokers (e.g. Canadians) cannot sell into the US market,
so it is going to be very hard to deal with your Canadian broker.
You probably want to look into moving the stocks to a US account;
transferring to the US affiliate (subsidiary) of you current broker
is probably easiest.
Also a second question.

With my deemed non-resident status. Can I buy a house in Cdn and not pay
capital gains when I sell the house and buy another house?
No. You are not a resident, you don't get the primary residence tax
break.
I want it to
be my primary residence even though I don't live there...... my folks
will live there.
Your parents do qualify for the capital gains exemption.
The "obvious" technique would be to just give the house to
your parents, and hope they leave it to you in their wills.
This however, will NOT work because it would run afoul of the
US gift tax rules.

Perhaps someone else has (a pro) has good idea. I don't.
 
A

AGN

Alan Bowler said:
True. But not quite relevant. It is possible, to be deemed a resident
in both Canada and the US in the same tax year(s), and so have to
declare world income to both tax authorities. This is such a case, he
is clearly a resident of the US, and he stated that he believes that he
still has "sufficient ties" that he is still "deemed" a resident of Canada.

Tax filings are a lot easier if you are resident of a single country,
and that is one good reason to try and cease being a Canadian resident.
However, maintaining Canadian residency has its advantages also.
Deferal of capital gains taxes is just one of these.
Deferral of capital gains was in fact the main reason that CCRA came
up with "deemed non-resident" (DNR) designation.

Tired of emigrants "hiding" their cap gains (avoiding deemed
disposition on departure) by maintaining a pretense of Cdn residence,
they invented the DNR category by using the treaty definitions of
residency to "deem" the taxpayer non-resident and thus trigger deemed
dispo.

Nowadays, because cap gains have dried up, DNR is a great advantage to
emigrants in another way: no longer the need to scramble to rid
oneself of all major Cdn residential ties: merely establish a
preponderance of ties in another country (ie. meet the 'centre of
vital interests' clause of the applicable treaty) and declare yourself
DNR. At that point you merely report foreign income, and then deduct
it at line 256.

Great example of a hammer invented by CCRA, being turned around and
used against them.
 
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A

AGN

Alan Bowler said:
Note that you probably have to do a final tax filing with CCRA for the
period up to the time you ceased to be a resident, and report accrued
capital gains on assets (like these stocks). I.e. you treat them as if
you sold them at fair market value on the date you ceased to be a
Canadian resident. Use those values as you cost base for future US filings.

As you observed, the amounts have been reported to you as "foreign
taxes" on your brokerage statements. How you actually report this
to the IRS I have no clue. As I said before talk to a pro the first
year.
What has happened is that your Cdn broker has collected withholding
tax for the IRS, which they shouldn't have had to do if the broker had
been notified that you were now a US resident (filing a W-9 with your
broker is the official way to do this).
Since these ar foreign assets and foreign dividends, and you are non
resident (PLEASE stop using the term "deemed", this has special
connotations) neither the dividends nor the tax are to be reported to
CCRA. Because you did not notify your broker of your status you will
have to write a note to CCRA to explain why a T3 was (erroneously)
issued for these dividends.

As alan said the tax has been withheld and remnitted to IRS. Simply
include the tax ammount along with all other tax payments you made for
the year on your 1040 (line 61). Report the actual dividends on
scedule B and line 9 of 1040. The tax you paid, even though circulated
through a Cdn broker, is not considered "foreign" to the IRS.

Of course, had these been cdn dividends, the reverse would have been
true: you would owe cdn tax ( Cdn non-resident tax that should have
been withheld at source) and would have to report foreign dividend and
foreign tax withheld on your IRS 1040.
Note that the US regulators are aggressive about enforcing the rule
that foreign brokers (e.g. Canadians) cannot sell into the US market,
so it is going to be very hard to deal with your Canadian broker.
You probably want to look into moving the stocks to a US account;
transferring to the US affiliate (subsidiary) of you current broker
is probably easiest.
You are indeedd making your life difficult by not being completelky
open with
your Cdn broker.

It is clear by the dividend withholding issue that you have not
notified your Cdn broker of your US residential status. This puts them
and you in an undesirable position. Get this straightened out quickly,
as brokers tend to gets antsy when they find out that they've been put
in a regulatory non-compliant position.
 

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