Dispositions of property
This page provides information for emigrants of Canada on deemed dispositions of property.
If you ceased to be a resident of Canada in 2016, you were deemed to have disposed of certain types of property at their fair market value (FMV) when you left Canada and to have immediately reacquired them for the same amount. This is called a deemed disposition.
This applies to most properties. Some of the exceptions are:
- Canadian real or immovable property, Canadian resource property, and timber resource property. For more information, go to the note below;
- Canadian business property (including inventory) if the business is carried on through a permanent establishment in Canada. For more information, go to the note below;
- pension plans, annuities, registered retirement savings plans, pooled registered pension plans, registered retirement income funds, registered education savings plans, registered disability savings plans, tax-free savings accounts, deferred profit-sharing plans, employee profit-sharing plans, employee benefit plans, salary deferral arrangements, retirement compensation arrangements, employee life and health trusts, rights or interests in certain other trusts, employee security options (exercised) subject to Canadian tax, interests in certain personal trusts resident in Canada, and interests in life insurance policies in Canada (other than segregated fund policies). For a complete list, refer to the definition of “excluded right or interest” in Subsection 128.1(10) of the Income Tax Act; and
property you owned when you last became a resident of Canada, or property you inherited after you last became a resident of Canada, if you were a resident of Canada for 60 months or less during the 10-year period before you emigrated.
If you ceased to be a resident of Canada and you elected to declare the deemed disposition of properties listed in items 1 or 2 above, include those properties when calculating your deemed dispositions and fill out Form T2061A, Election by an Emigrant to Report Deemed Dispositions of Property and any Resulting Capital Gain or Loss.
Reporting the deemed disposition
On your 2016 return, you have to report the capital gain or capital loss that results from your deemed disposition.
To calculate your capital gain (or loss) for a deemed disposition of property, complete Form T1243, Deemed Disposition of Property by an Emigrant of Canada.
Include on your Schedule 3, Capital Gains (or Losses) in 2016, the capital gain (or loss) that you reported on Form T1243.
List of properties
If the fair market value (FMV) of all the property you owned when you left Canada was more than $25,000, complete Form T1161, List of Properties by an Emigrant of Canada, to list all of your properties inside and outside Canada and attach it to your 2016 return.
Exclude from your list any personal-use property valued at less than $10,000. Examples of personal-use properties are:
- household goods;
- collectibles; and
All amounts are in Canadian dollars.
File your tax return by the filing due date. The penalty for failing to file Form T1161 by the due date is $25 per day you are late. There is a minimum penalty of $100, and a maximum penalty of $2,500.
Even if you do not have to file a return, you must send Form T1161 on or before your filing due date.
Deferring the tax owing
You can elect to defer the payment of tax on income relating to the deemed disposition of property, regardless of the amount. You would then pay the tax later, without interest, when you sell (or otherwise dispose of) the property. This election does not apply to the deemed disposition of an employee benefit plan.
If you make this election for 2016, you must do so on or before April 30 of the year after you emigrate from Canada.
If you make this election for 2016 and the amount of federal tax owing on income from the deemed disposition of property is more than $16,500 ($13,777.50 for former residents of Quebec), you have to provide us with adequate security to cover the amount. You may also be required to provide security to cover any applicable provincial or territorial tax payable.
Contact the CRA as soon as possible to make acceptable arrangements before April 30.
What if you return to Canada?
Unwinding a deemed disposition
If you ceased to be a resident of Canada after October 1, 1996, and you later re-establish Canadian residency for income tax purposes, you can elect to make an adjustment to the deemed dispositions you reported when you emigrated from Canada. We refer to this as an election to “unwind” a previous deemed disposition.
You can make this election to unwind if you still own some or all of the property that was deemed disposed of when you emigrated. If you make this election for taxable Canadian property, you can reduce the gain reported on your tax return for the year you emigrated by an amount you specify, up to the amount of the gain you reported.
If you make this election for property other than taxable Canadian property, you can reduce the amount of the proceeds of disposition that you reported on your tax return for the year you emigrated by the least of:
- the amount of the gain reported on your tax return for the year you emigrated;
- the fair market value (FMV) of the property on the date you returned to Canada; or
- any other amount to a maximum of the lesser of the above-noted amounts.
The definition of taxable Canadian property changed on March 5, 2010. As a result, property that was considered taxable Canadian property when you became a non-resident may no longer be considered taxable Canadian property when you return to Canada. If this is the case, special rules may apply. For more information, contact the CRA.
The election to unwind may result in the reduction or elimination of the tax owing for the gain from the previously reported deemed disposition of property on emigration. If you make this election and you had previously elected to defer payment of the tax owing on the income from the deemed disposition, some or all of the security you may have provided may be returned to you.
You can make this election by sending the International and Ottawa Tax Services Office your request in writing on or before your filing due date for the year you re-establish Canadian residency for income tax purposes. You must also include a list of the properties you own and the FMV of each property to which this election applies.
Previously deferred tax
When you immigrate to Canada, you are generally considered to have disposed of, and to have immediately reacquired, most properties you own on the date you immigrate. If you had previously elected to defer payment of the tax owing on the gain from the deemed disposition of property other than taxable Canadian property on emigration, you may now have to pay the deferred tax. For more information, contact the CRA.
Disposing of property after you emigrate from Canada
As a non-resident, you may have disposed of, or plan to dispose of, taxable Canadian property such as:
- Canadian real or immovable property;
- Canadian business property; or
- unlisted shares of Canadian corporations.
For the procedures you must follow, go to Disposing of or acquiring certain Canadian property, or read Disposing of certain types of Canadian property in Guide T4058, Non-residents and Income Tax. You can also refer to Information Circular IC72-17, Procedures Concerning the Disposition of Taxable Canadian Property by Non-Residents of Canada – Section 116.
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