I paid Canadian departure tax. Does the US recognize it?

Not on its own. Your US cost basis stays at what you originally paid, so a later sale hands the US the full gain since purchase, including the part Canada already taxed. The fix is an election under Article XIII(7) of the Canada-US tax treaty, which resets your US basis to the value Canada used at departure, made on the US return for your first tax year ending after the move with Form 8833 attached.

Why doesn’t paying Canadian departure tax give me a US cost base?

Because the US never saw a sale. When you cease Canadian residence, Canada deems you to have disposed of most property at fair market value under section 128.1(4)(b) of the Income Tax Act and taxes the accrued gain. Under IRC section 1012 your US basis is what the property cost you, and nothing in the US code moves it because another country ran a deemed disposition. You land in the US with the same shares at the same old cost, and a departure tax the IRS never sees.

What does the Article XIII(7) election actually do?

It makes the US treat the deemed sale as real. Under Article XIII(7) of the Canada-US tax treaty, a person taxed by one country on a deemed alienation can elect to be treated in the other country as if they had sold the property at fair market value and bought it straight back. So for US purposes you sold and rebought everything at the departure-date value.

Point of comparison	Without the election	With a timely election
US basis after the move	Original cost (IRC 1012)	FMV at the Canadian deemed disposition, for property a US sale wouldn’t have taxed (Rev. Proc. 2010-19, s. 4.02(2)); property the US could have taxed runs through s. 4.01 instead
US gain when you later sell	Everything since you bought, including the gain Canada taxed	Growth since the move
Paperwork	None	Form 8833 plus FMV and Canadian-reporting documentation
Deadline	None	Timely filed US return for your first tax year ending after the residence change (s. 4.02(3))
Can you undo it?	Nothing to undo	Only with IRS consent (s. 4.06)

The IRS wrote Rev. Proc. 2010-19 to administer this election for Canadian emigrants, and Section 4.02(2) is scoped property by property. For property the US couldn’t have taxed on a sale the moment before you left, which covers most of what an ordinary emigrant holds, your US basis becomes the fair market value Canada used and the election itself triggers no US tax.

What if I’m a US citizen, or I own US property?

Then part of your file sits in Section 4.01 of Rev. Proc. 2010-19, where the same election usually costs you money. Section 4.01 covers property that a sale immediately before your move “would have been subject to tax by the United States in accordance with the Treaty”, and the treaty’s saving clause reaches a further slice, which is why US citizens sit outside this relief. Elect on that property and Section 4.01(2) makes you recognize the gain in the year of the deemed disposition, pulling a US tax bill forward. Loss is named in that same sentence, conditioned on Section 4.05.

the individual “must recognize gain (and, if permitted by section 4.05 of this revenue procedure, loss) in the taxable year of the deemed disposition.” Rev. Proc. 2010-19, s. 4.01(2)

So the sentence names a loss as well as a gain, which matters if the US property you’re carrying is worth less than you paid. Read Section 4.05 before assuming that helps you, because it only restricts. Its rules run to a multiple-property emigrant, in the all-or-nothing section below, and there a net loss removes the election across the whole portfolio rather than opening anything. It grants nothing on the loss side, so whether a single-property emigrant sitting on a loss can elect at all is a question to put to a preparer rather than one this page settles.

Section 4.01 reaches US real property under Article XIII(1) and business property of a US permanent establishment. Relief from the doubling comes through Article XXIV of the treaty, and the step-up isn’t the route. (If you aren’t a US citizen and were still a Canadian resident at the deemed disposition, Section 4.01(2) sends you to Article XXIV(2), where Canada credits the US tax.)

You can’t carve it out. The election covers every property Canada deemed disposed, so one US rental inside an ordinary portfolio gets recognized under 4.01 while everything else steps up under 4.02. If you’re a US citizen, a green card holder, or you own anything American, put the full property list in front of a cross-border CPA.

How and when do I make the Article XIII(7) election?

On one specific return. Section 4.02(3) requires you to report the deemed disposition on your timely filed US return for the first taxable year ending after your change of residence, and to attach Form 8833, the IRS form for treaty-based return positions under IRC section 6114.

What goes with the first-year return	Where the rule sits
Report the deemed disposition on the return itself	Rev. Proc. 2010-19, s. 4.02(3)
Attach Form 8833 citing Article XIII(7), listing every deemed-disposed property	s. 4.02(3) and s. 4.05(2)
Attach documentation of each property’s fair market value under Canada’s rules	s. 4.02(3)
Attach proof the gain was recognized and properly reported for Canadian tax	s. 4.02(3)

“First taxable year ending after your change of residence” usually means the calendar year you moved, so a June mover files that return the following April. Move in November or December and the same rule still points at the move year, even though you were a US nonresident for almost all of it and might not otherwise file. I’d calendar it while you’re filing the Canadian departure return. It’s easy to lose track of, and it’s on the full leaving-Canada checklist.

Can I pick which assets to elect on, or is the treaty election all-or-nothing?

No picking. Section 4.05(2) of Rev. Proc. 2010-19 makes it all-or-nothing: if Canada deemed you to dispose of multiple properties, the election must cover all of them, and the Form 8833 has to list each one. In that same multiple-property case, Section 4.05(1) also blocks the election unless those deemed dispositions produce a net gain for Canadian tax purposes. And once made, it sticks.

An election made under this revenue procedure “cannot be revoked except with the consent of the Commissioner.” Rev. Proc. 2010-19, s. 4.06

Run the numbers before you file.

Can’t I just claim a US foreign tax credit for the Canadian tax instead?

Rarely, and the reason is timing. The CRA taxed a gain deemed to arise the moment before you became a US resident, so it never enters your US taxable income for the move year, and a credit must offset US tax on the same income. The US gain arrives years later at the sale, with no Canadian tax that year to credit. The limitation in IRC section 904(a) also caps the credit by income from sources outside the US, while a US resident’s sale of stock is US-source under IRC section 865(a). Article XXIV does carry credit relief in the Section 4.01 cases above.

What if I already filed my first US return without the election?

Get advice before you sell. The revenue procedure’s four corners don’t hand current movers a clean fix. Its stated window is the timely filed first-year return, and its retroactive-election sections (Rev. Proc. 2010-19, Sections 4.03 and 4.04) were written for people who emigrated after September 17, 2000 and before March 29, 2010. Someone who moved recently and missed the attachment isn’t in either. Outside the procedure, general relief routes get raised, none of them automatic.

• a corrected return filed before the due date passes
• an amended return
• a late-election relief request under the section 301.9100 regulations

An election whose due date comes from a revenue procedure is the kind those rules were written around, but none of it is a promise. Which route is open turns on your facts and how that return was filed, so it’s a call for a cross-border CPA.

What does the double-tax math look like?

Same portfolio as our departure-tax guide. Without the election your US basis stays at the $120,000 cost, so a $230,000 sale is a $110,000 US gain, $80,000 of it already taxed by Canada. Elect in time and the basis resets to $200,000, so the US gain is $30,000.

The election is a federal treaty position, and states write their own rules. Ask your preparer whether yours recognises a treaty basis adjustment, and settle it before the sale.

If you haven’t left yet, estimate the Canadian side first to size the gain the election would protect.

What should I do next?

If you’re moving this year, save your departure-date market values and the Canadian filings showing the deemed gain, then calendar the election for the US return covering the year you moved. Already moved? Pull that return and check for a Form 8833.

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.