Question

Hi

I will be moving to Victoria to start a new job in the tech sector and I’ll need some tax advice for the imminent move.

I’ll be moving up with relatively significant assets comprised of:

• -401k which may need to stay invested in the US
• -old employer stock purchase plan (all vested)
• -regular investment account with fidelity
• -House in California
• -Rental properties in California

A few of my questions to start (I have a sense I’ll need to pay for a consultation).

• Can I move my 401k to Canada without any adverse tax consequences?
• How does it work if exercise some of my stock options after I move to Canada?
• Fidelity says my account will be limited if I move to Canada, what are my options?
• My California home is for sale. What happens if I sell it after moving to Canada?
• Are their any complications with having California rental properties?

Perhaps it would be best to have a call on the info above.

Thanks

Answer

Hi XXXXX

You’re probably right, considering the complexity of your situation it would be best to setup a time to discuss your tax situation. The information below is assuming you’re a Citizen of the US.

That being said I’ll laid out some general answers below:

• You may be able to move the 401k by collapsing it, paying tax in the US, rolling to the RRSP and then claiming a foreign tax credit in Canada for the US taxes paid. That’s a very simplified explanation however as other factors need to be considered. For example, it may not work if you don’t have enough other Canadian income or the 401k is too large. We can discuss further at our meeting.
• The taxation of the stock options is fairly complex and we should review the plan before making any taxation comments.
• Yes, US brokers are limited non-residents from transacting on US accounts while abroad. In many cases, especially if the account is not locked in you’ll be able to transfer the assets to a Canadian investment account. There are often limitations however on proprietary US mutual funds that cannot be held by Canadian brokers.
• If the California home sells while you are in Canada, your gain is less than $250,000 and you lived in it for 2 out of the last 5 years there shouldn’t be any additional Canadian or US tax on the sale. We should however review the sale to make sure my assumptions are correct.
• There should’t be any significant complications with the rental properties. We will need to revalue the cost of the properties (and all other non-registered assets) for Canadian purposes. This Canadian rule allows for a “bump” in certain asset cost basis to ensure you are not taxed on accrued gains produced before entering Canada. The same would apply to the principal residence above.
• Based on the information above you’ll need to file each year:
  • US 1040 income tax returns
  • California state non-resident tax returns for the rental properties
  • Final California income tax returns for the exit from California
  • Canadian and Provincial tax returns
  • Additional filings may be required

As mentioned above these are simply general answers and we should discuss your situation in more detail. I’ll have my reception call to you book an appointment. Or please call me at 250-381-2400 if you want to discuss the information above in more detail.

I look forward to our meeting.

Thanks

Phil

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