Stock awards taxation after a move from Canada

[gtushar1991]

I moved from Canada to US for the same employer and I was awarded RSUs at the time of joining in Canada, and so they vested partly between Canada and US.

In 2021, the vesting price was, say, $10

In 2022, I moved from Canada to US, but did not sell the RSUs. I did a deemed disposition of RSUs using the date 01/09/2022, I paid taxes on the RSUs to Canada (CRA) at sell price of $12. So, $2 gain.

In 2023, I sold the RSUs while in the US, and I received a 1099 with the adjusted cost basis of $10. Since I already paid taxes to Canada using a $12 sale price. Do I calculate the gain using $10 or $12 to pay to the IRS? 

[RobertB4444]

Since you did the deemed disposition in 2022 at $12 you should adjust the basis for the transaction to $12 for tax year 2023.

@gtushar1991   

[gtushar1991]

Follow up. 

Should I use the original vest date as the purchase date for the RSUs to figure out whether it's a long-term or short-term capital gain? 

Or should I use the deemed disposition date as the purchase date for the RSUs?

[DavidD66]

Your acquisition date for RSUs is the date they vested.  

[azadnaik]

Does this mean I should do the adjustment to cost basis by saying "The basis shown in Box 1e is incorrect"

[ThomasM125]

You are correct, you indicate that the cost basis reported in box 1(e) is incorrect on the screen where you enter the cost basis of the shares sold. 

[gtushar1991]

If the stock is an ESPP or RSU, on the next page it asks for "adjusted cost basis" what should be selected for that ?

[DavidD66]

If I understand your original post correctly, this is what occurred:

• In 2021, while living in Canada you had RSUs vest with a value of $10.  This would have resulted in $10 (per share) being included in your taxable income.  Your cost basis in the RSUs in $10.
• In 2022, while living in the US, you did a deemed sale at $12 per share.  You reported a realized gain of $2.00 per share on your Canadian tax return, but did not report on your US tax return.
• In 2023, while living in the US, you sold the shares and received a 1099-B with a cost basis of $10.  

I would say that the cost basis of $10 is correct for your US tax return.  Had you reported the $2 per share gain on your 2022 US tax return the cost basis would be $12.  But you didn't report it, so your cost basis is $10.

[gtushar1991]

Oh, I see. 
So, the tax that Canadian government took on the $2, I got it back as a tax credit from the US on my 2022 US return. But since I didn't show the $2 as income on 2022 US return, I got the tax back for an income I didn't show to the US.

But now, I will show that income to the US on 2023 tax return by choosing a $10 cost basis for the stocks. That makes sense, thank you for clarifying.

[gtushar1991]

Is the logic same for ESPP as well? i.e. I use the cost basis as mentioned in the 1099 for ESPP ?

[RobertB4444]

Yes.

@gtushar1991