The Deemed Disposition When You Leave Canada: Exactly What Is Exempt, What Is Taxed, and Which Form Reports Which

The emigration rules deem a departing resident to have disposed of property at fair market value — but the statute's exceptions do as much work as the rule, and the compliance lives in three forms that are routinely confused. The perimeter first. Exempt from the deemed disposition: Canadian real property (and Canadian resource and timber property) — Canada keeps jurisdiction over the land, so it waits for the real sale; property of a business carried on through a permanent establishment in Canada; registered plans and rights under them — RRSPs, RRIFs, RPPs, TFSAs, RESPs, FHSAs, DPSPs, and pension entitlements; employee stock options (their own sourcing regime applies at exercise instead); and, for short-term residents (resident 60 months or less in the ten years before departure), property they owned when they last became resident or inherited during the stay. Everything else is deemed sold: non-registered securities, private company shares, foreign real estate, foreign business interests, crypto, interests in most trusts and partnerships, and personal-use and listed personal property above their thresholds. Then the paperwork. Form T1161 is the inventory — a list of all reportable property owned at emigration, required whenever total fair market value exceeds $25,000 (excluding cash, registered plans, and modest personal effects), filed with the final return, carrying its own $25/day penalty to $2,500 for lateness even when no tax is due anywhere. Form T1243 is the computation — the deemed dispositions themselves, property by property, producing the gains that flow to Schedule 3. Form T1244 is the election to defer paying the departure tax until actual disposition — interest-free, with security required once the federal tax deferred passes the threshold tied to the first bracket (real security: letters of credit, share pledges; the CRA negotiates).

Key takeaways

• Exempt list (no deemed sale): Canadian real property; Canadian-PE business property; registered plans and pensions; employee stock options; short-term residents' pre-arrival and inherited property.
• Taxed list: taxable accounts, private corporation shares, foreign real estate, crypto, partnership and most trust interests, valuable personal property. Fair market value at departure, gain against ACB, half taxable at final-year rates.
• T1161 ≠ T1243: the list files above $25,000 of property even when nothing is taxable (a house plus an RRSP can trigger it — exempt from tax, listed anyway per the form's own inclusion rules); the computation files when deemed dispositions produce results to report. Missing the list is the classic no-tax, real-penalty error.
• T1244 defers payment, not the tax: the liability crystallizes at departure at departure values; the election parks it, interest-free, until each property actually sells — with security above the threshold and annual account maintenance. Ideal for private shares and illiquid positions; unnecessary for liquid portfolios you could simply sell.
• Losses and unwinding: deemed losses offset deemed gains within the event; and a returning former resident can unwind the departure tax on property still held (the election on returning re-establishes the old cost history) — the provision that keeps a boomerang move from paying for a round trip.
• The US will not mirror any of it unless told: the treaty election with the first US return sets US basis to the deemed-disposition values, keeping the Canada-taxed gain out of future US gain. The T1243 values are the source document — one more reason the valuation work is done carefully once.

Valuation is the substance

Public securities value themselves off statements. Private company shares, the family partnership, the Arizona rental, and the crypto stack do not — and the departure-date valuation both sets the Canadian tax and becomes the US basis, so it is worth doing at a standard that survives review on both sides. For private shares that means a real valuation report; for foreign real estate, an appraisal; for crypto, exchange records preserved. The number is used twice and challenged from two directions; build it accordingly.

Worked example

A Kitchener founder departs for Miami owning: her home (C$1.1M — exempt, Canadian real property), RRSP C$380,000 (exempt), TFSA C$110,000 (exempt from deemed disposition; closed before departure anyway), a C$260,000 taxable portfolio with C$70,000 of accrued gains (taxed), 30% of her private company valued at C$1.8M against nominal cost (taxed — C$1.79M gain), and a Scottsdale condo, cost US$300,000, worth US$420,000 (taxed — foreign real property is not exempt). Filings with the final T1: T1161 listing the reportable property; T1243 computing deemed gains of roughly C$2.02M (portfolio, shares, condo); Schedule 3 carrying about C$1.01M taxable. She pays the portion attributable to the portfolio and the condo, and files T1244 deferring the private-share tax — security posted as a pledge of the shares — payable only on a real exit. With her first 1040: the treaty basis election adopting the T1243 values, so the US measures her future company gain from C$1.8M, not from zero. The valuation report on the company, commissioned two months before departure, is the document every later filing in both countries leans on.

Official sources

"When you leave Canada, you are considered to have sold certain types of property (even if you have not sold them) at their fair market value (FMV) and to have immediately reacquired them for the same amount. This is called a deemed disposition and you may have to report a capital gain (also known as departure tax)." — Canada Revenue Agency, Leaving Canada (emigrants), https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/leaving-canada-emigrants.html

The CRA explains that when a non-resident disposes of taxable Canadian property such as Canadian real estate, the non-resident must notify the CRA and obtain a certificate of compliance under section 116, and that if no certificate is obtained, the purchaser must withhold and remit a percentage of the purchase price. — Canada Revenue Agency, Disposing of or acquiring certain Canadian property, https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/disposing-acquiring-certain-canadian-property.html

Practitioner note

The deemed disposition rewards taxonomy: sorted correctly, most clients' property lands in the exempt column and the taxed remainder gets valued once, well. The two failure modes we see are the T1161 skipped because 'nothing was taxable' — a $2,500 lesson in reading form instructions — and the private-share valuation done cheaply, which haunts the T1243, the T1244 security negotiation, and the US basis election in one stroke.

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

Next step

Fairlight prepares the emigration filing set — the exempt/taxed property sort, departure valuations built to dual-country standard, T1161/T1243/T1244 preparation, deferral security, and the US basis election. See cross-border pricing or book a call.