Ask Tax Question

I am a Canadian citizen who moved to the US a few months ago. We were not able to sell our residence before we left, and we are selling now. If we had sold before we left Canada, the big capital gain on it would have been tax-free. By selling it now, I am told that I have to put-up 25% of the capital gain as security with the Canada Revenue Agency, to get a “clearance”, and the IRS will tax the gain because they consider my cost base to be the amount I paid when I bought it 12 years ago. Am I screwed?

Cross Border Tax
TaxConnections Members... Answer This Question Want To be One of Our Tax Experts? Register Here

Tax Professional Answers

User Photo
Michael Atlas, CPA, CA
No, you are not!
Selling it before you left would have been easier, because you would not have had to deal with CRA tax clearance requirements.
However, the gain should be tax-free in Canada under the “principal residence exemption”. The CRA has an administrative policy of allowing that exemption to be applied when you apply for a tax clearance, so you should not have to put-up any security with the CRA.
For US tax purposes, you should be able to use the fair market value when you left Canada as your cost base. This is done by filing your US tax return in accordance with Article XIII(6) of the Canada-US Tax Convention, which states:
“Where an individual (other than a citizen of the United States) who was a resident of Canada became a resident of the United States, in determining his liability to United States taxation in respect of any gain from the alienation of a principal residence in Canada owned by him at the time he ceased to be a resident of Canada, the adjusted basis of such property shall be no less than its fair market value at that time.”
Leave a Comment 114 weeks ago

Meet Leading Tax Advisors

User Photo Kathryn Morgan

Bossier City, Louisiana, USA

Enrolled Agent, Master Tax Advisor

User Photo Peter J. Scalise

New York, New York, USA

Federal Tax Credits & Incentives Practice Leader

User Photo John Stancil

Lakeland, Florida, USA

Tax Advisor/CEO

User Photo John Dundon, II EA

Denver, Colorado, USA

Tax Director

User Photo Steven Potts JD EA IAR

Fullerton, California, USA


User Photo Devon McCarthy FCCA, EA

Sanford, Florida, USA


User Photo Caran Ebert, CPA

Topanga, California, USA

Tax Advisor

User Photo Lisa Nason CPA, MST

Greenville, South Carolina, USA

Managing Shareholder

User Photo Gary Carter, PhD, MT, CPA

Edina, Minnesota, USA



Santa Clara, California, USA

Tax Principal - President

User Photo Bill Robinson, CPA

Chattanooga, Tennessee, USA


User Photo Hugo Van Zyl

Stellenbosch, South Africa

Exchange Control & Master Tax Practitioner (SA)

User Photo Douglas Stransky

Boston, Massachusetts, USA

Tax Partner, International Tax

User Photo Larry Stolberg, CPA, CA

Toronto Mississauga Oakville Burlington Hamilton, Canada

Tax Specialist

User Photo Gerald Nordland

Phoenix, Arizona, USA


View/Select our Current List of Tax Topics

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Previous PageNext Page

Contact Us Today