Is this estimation right?

[queenie4o]

Scenario: Individual A moves to Toronto as a permanent resident via express entry while retaining U.S. citizenship. They will only open a Canadian bank account and an account with a Canadian based crypto exchange. Those are the only two reporting assets they will have.

Let’s say after 10 years of investing money into a crypto account that individual A accumulates $1,000,000 CAD in capital gains. Then let’s say that Individual A on the 10th year is living in Canada and making $100,000 CAD per year.

What will be the tax obligations in selling the $1,000,000 capital gains from both the Canadian and U.S. side?

Would this estimation be right? This is the Canadian side:

• 50% of 1,000,000 = $500,000 CAD
• $100,000 CAD + $500,000 CAD = $600,000 CAD
• $600,000 CAD @ 33 percent = $198,000 CAD
• $600,000 CAD @ 13 percent (Ontario tax) = $78,000 CAD
• Total: $276,000 CAD

This is the U.S. side:

• $785,550 (Used converter calculator to USD)
• $785,550 - $107,600 (foreign earned income exclusion) = $677,950 USD
• $677,950 @ 20 percent = $135,590 USD

Note: I know this is taking a lot of liberties into effect. I doubt that the exchange rate or the tax rate will be the same in 10 years. Also, Individual A is not planning to sell between the 10 year period. Individual A will only sell when they are ready to move back to the U.S. at the end of the 10 year period.

Thanks everybody!

 

[subitoit]

@queenie4o I would recommend a tax accountant so that you don't mess up your tax implications and get in trouble with the IRS (or Canadian IRS).

 

[queenie4o]

@subitoit I agree 100%, but for now I just need to know that I'm on the right track. Thanks!

 

[eee27]

@queenie4o Capital gains are not earned income. The most you could exclude is the CAD100k converted to USD.

You'll also be over the Net Investment Income Tax threshold, so you'll likely owe 3.8% of that CAD1M. You also won't be able to claim Canadian income taxes paid as a credit against this.