@sorrytale , my initial reaction is that this is a case of "mark-to-Market" scenario.
Thus you comply with the Canadian requirement of "deemed sale" / "Mark-to -Market" and settle the tax consequence thereof. And then for the US purpose you do the same -- thus you have foreign source income ( computed under US laws, recovery of depreciation under US laws, Capital gains tax etc. all taken care of . And thus you have foreign source income, foreign taxes eligible for FTC treatment.
This also means that your basis in the property for future disposal ( at least in the US case and logically for Canadian case ) is now FMV.
This is generally what happens ( in US case ) for US persons ( GreenCard/ residents for tax purposes ) considered long-term residents and when they give up residency and leave the country -- US collects the taxes on a mark-to market basis.
So what gets in the way of this path -- 1. you mentioned something about NYS taxes/situation; 2. anything in the tax code ?; 3. something else ?
As I see this , both Canada and US federal each get their share of the taxes ( had you actually sold the asset ). Unless of course there is loss in the "deemed" transaction.
Please tell me more ( or PM me ) with more details as to why you would not want to do this.
pk
