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Re departure tax: what if deemed disposition from stocks resulted in capital losses and there are no gains from prior years to absorb the loss? Can I use the original cost, instead of the FMV, which is lower than the original cost for sales in the future? I see that the Canada-US tax Treaty allows taxpayers to elect for U.S. tax purposes a deemed disposition of property subject to the deemed disposition rule in Canada, my understanding is if I do NOT elect, I should be able to use the original cost for future sales. Could you please confirm whether my understanding is correct? Thank you very much for your time. I sincerely appreciate it.
Hi Mohan,
You can elect to dispose of certain properties ordinarily exempt from departure tax, including Canadian real estate and inventory held by a Canadian sole proprietorship. This election can be beneficial if you incur a capital loss due to the deemed disposition of non-exempt properties.
However, if you do not own Canadian real estate or inventory with accrued gains, any net capital loss will be carried forward indefinitely. This loss can be used to offset future capital gains, such as those arising from the disposition of Canadian real estate.