The Arrival Step-Up: Canada Resets Your Cost Basis the Day You Move — the US Does Not, and the Gap Is a Planning Window

Short version: Article XIII(7) Election: Stepping Up Basis After a Move

Canada meets new residents with a genuinely generous rule: with limited exceptions, everything you own on the day you become resident is deemed acquired at its fair market value on that day. Your Apple shares bought at $40, worth $230 on arrival — Canada's cost base is $230, and Canada will never tax the first $190 of gain. The US, taxing its citizens continuously, keeps the $40 basis forever. Two consequences follow. First, the planning window: gains realized before the residency date are taxed by the US alone, at long-term capital gains rates that are usually far below combined Canadian rates — so the standard pre-move play is harvesting the winners, resetting US basis by sale and repurchase while Canada's step-up handles its own side automatically. Second, the permanent bookkeeping: for everything not sold, you now carry two cost bases per holding — the US historic basis in US dollars and the Canadian arrival value in Canadian dollars — and every future sale runs both ledgers, with foreign tax credits reconciling tax on the slice both countries claim (post-arrival appreciation) and nothing reconciling the slice only the US claims (pre-arrival appreciation, where Canadian tax is zero and US tax stands alone).

Key takeaways

• The rule: deemed acquisition at fair market value at the time of becoming resident, for capital property generally; the main exception is taxable Canadian property (Canadian real estate and certain other Canadian-situs assets), which keeps its history because Canada could always tax it.
• Document the day: brokerage statements, crypto exchange records, business valuations, appraisals for real property — dated to the residency date, kept permanently. The step-up is only worth what you can prove.
• The pre-move harvest: sell appreciated positions before the date; US long-term rates (0/15/20% plus NIIT) apply with no Canadian tax ever; repurchase freely — the US wash sale rule constrains losses, not gains. This is frequently the largest single-number planning item in a move.
• Hold the losers: loss positions are usually better kept — post-arrival, a sale realizes the loss in both systems (the Canadian loss measured from the stepped-up value, the US loss from historic basis), giving it work to do against future gains in each.
• After arrival, sales split three ways: post-arrival gain — taxed by both, credits align; pre-arrival gain — US-only, no credit relief (Canada collected nothing); the FX layer — Canada measures everything in CAD, so currency movement is Canadian gain or loss even when the US-dollar price is flat.
• The ledger discipline: ACB in CAD per Canadian averaging rules alongside US basis per lot — a spreadsheet started on arrival day, or a reconstruction project priced by the hour later.

Where the window closes

The step-up covers what you own at the moment residency begins — options, RSUs, and carried compensation have their own timing rules (unvested equity is generally taxed by reference to where the work was done, not the step-up), and business interests, crypto, and collectibles all qualify for the deemed acquisition but demand real valuation evidence. The window itself closes silently: residency can begin earlier than people assume (a spouse arriving first, a home available), and gains harvested a week after the true date were harvested into both systems.

Worked example

A couple moving from Boston to Calgary on October 1 holds: index funds, basis US$250,000, value US$610,000; an individual stock, basis US$90,000, value US$60,000; and vested employer RSU shares, basis US$120,000, value US$200,000. September: they sell the index funds and the RSU shares — US$570,000 of long-term gain minus basis nets US$340,000 of gain taxed federally at 15/20% plus NIIT, Massachusetts taking its share on the way out, Canada taking nothing ever — and repurchase equivalent ETFs the same week. The losing stock they keep. October 1: statements saved; every position's Canadian ACB is that day's value in CAD. Two years later they sell the losing stock at US$55,000: a US capital loss of US$35,000 against historic basis, and a Canadian capital loss measured from the arrival value — both usable in their own systems. The number that made the September sales obvious: realizing the same US$340,000 of gain as Alberta residents would have added roughly 24% Canadian tax on top of partially-creditable US tax — a six-figure cost of waiting three weeks.

Official sources

The CRA states that you become a resident "when you establish significant residential ties in Canada," report world income from that date, and are "considered to have sold the property and to have immediately reacquired it at a cost equal to the fair market value (FMV) on the date that you became a resident of Canada." — Canada Revenue Agency, Newcomers to Canada, https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/newcomers-canada-immigrants.html

The IRS explains that basis is generally the cost of property, adjusted for improvements, depreciation, and other items, and that inherited property generally takes a basis equal to fair market value at the date of death. — Internal Revenue Service, Topic No. 703, Basis of Assets, https://www.irs.gov/taxtopics/tc703

Practitioner note

The arrival step-up is the closest thing cross-border tax offers to a free option, and it expires at midnight on a date some clients can't name until we reconstruct it. The pre-move meeting exists for two deliverables — pin the residency date, then harvest against it — and the third, the arrival-day valuation file, is what makes the next thirty years of dual-ledger returns mechanical instead of forensic.

See also: Browse every cross-border tax topic guide, organized by situation.

Next step

Fairlight prepares the pre-move gain harvest and residency-date planning, the arrival valuation file, and the dual-basis ledger for everything retained. See cross-border pricing or book a call.