I'm moving back to Canada and still own a place in Florida: should I sell before I go?

On the Canadian side, it mostly doesn’t matter. As you become a Canadian resident the Act deems you to have disposed of the Florida place at fair market value and to have acquired it again at that figure, so the pre-arrival gain drops out of the Canadian base either way, and no Canadian tax falls due on arrival. The same reset removes a pre-arrival loss. What the decision turns on is the US side, which doesn’t move, and one Canadian filing that can switch on unless the place is personal-use.

Does Canada tax my Florida place when I become a resident?

No, not on arrival. The deemed disposition is timed to land while you’re still a non-resident of Canada, and for that part of your year Canada reaches only dispositions of taxable Canadian property. A house in Florida isn’t, so there’s nothing to tax on the day you land.

• The disposition is deemed to happen “immediately before the time that is immediately before” the moment your residence begins (ITA s. 128.1(1)(b)). Two “immediately before”s, which put the sale in non-resident time.
• For the non-resident part of your year, ITA s. 114 counts only “income or losses described in paragraphs 115(1)(a) to (c)”, and ITA s. 115(1)(b) confines those to gains “and allowable capital losses” from dispositions of taxable Canadian properties, whose real-property limb reads “real or immovable property situated in Canada” (ITA s. 248(1)).
• The acquisition is timed later, “at the particular time” (ITA s. 128.1(1)(c)), when residence begins.

So don’t picture a sale and repurchase at one instant: the sale sits in your non-resident life, the purchase at the start of your Canadian one.

So does the pre-arrival gain just disappear?

Out of the Canadian base, yes. And so does a pre-arrival loss, which is the half nobody expects. Same mechanism, other direction: if the place is worth less on your arrival date than you paid, the reset pulls your Canadian cost down to that figure and Canada never sees the drop, because the deemed disposition happened while you were still a non-resident.

• ITA s. 128.1(1)(c) deems you to have acquired the property “at a cost equal to the proceeds of disposition of the property”, which is arrival fair market value.
• ITA s. 54 turns that cost into adjusted cost base, “the cost to the taxpayer of the property adjusted, as of that time, in accordance with section 53”.
• ITA s. 40(1)(a)(i) measures a gain as proceeds over “the adjusted cost base … and any outlays and expenses … for the purpose of making the disposition”, so selling costs come off.

Two more points from the ITA 54 definition: no pre-reacquisition section 53 adjustment carries over, and where the property is depreciable, a rental for instance, the base is capital cost instead.

Your US property is inside the reset because it isn’t excluded. The list in 128.1(1)(b) has four live limbs for an individual: taxable Canadian property, inventory of a business carried on in Canada, Class 14.1 property of such a business, and an “excluded right or interest”, a closed list in 128.1(10) running to its final paragraph: registered plans, pensions, employment rights, annuities, social security, certain trust interests, a life insurance policy in Canada. Real property appears nowhere in it.

Those exclusions are prefaced “if the taxpayer is an individual”, so a corporation becoming resident gets no exclusion list at all: US property held in a Canadian corporation.

Does the treaty give me a US step-up too?

No, and the article most readers reach for is the wrong one. Article XIII(6) is the famous basis floor, and its scope is narrow in three directions: “a principal residence in Canada”, Canada to US, and an individual “other than a citizen of the United States”. A Florida house owned by someone moving north fails the first two; the third only limits who could ever use the paragraph.

Treaty paragraph	What it actually covers
Article XIII(6)	Floors the US basis of “a principal residence in Canada” owned when the individual ceased to be a resident of Canada, for an individual “other than a citizen of the United States”, moving Canada to US. It says nothing about US real property, and nothing about the Canadian side
Article XIII(7), as replaced by Schedule VI	Lets an individual elect to be treated in the other State as having sold and repurchased at fair market value, but only where a State treats them as having alienated the property and taxes them by reason of it. Canada’s arrival deeming doesn’t tax, so whether this reaches these facts is an open question on this page

If you met XIII(6) on our departure pages, that’s why it feels like it should work here (treaty Article XIII(6)). XIII(7) is the one that could matter, in its 2007 protocol wording (treaty Article XIII(7), as replaced by Schedule VI): its trigger takes a State treating the individual as having alienated a property and taxing them by reason of it, and Canada’s arrival deeming does the first and not the second, so we flag it rather than assert it, for a practitioner on your facts.

What’s left is the mismatch, and whether credit relief lines the two gains up is a separate analysis. If the place has been rented, see what the US taxes when a Canadian sells a US rental and getting the US withholding back.

What do the two gains look like on the same sale?

Different numbers, from different starting points, on one closing. The Canadian gain runs from your arrival value; the US gain runs from what you paid years earlier, because nothing in a Canadian deeming provision touches US basis.

What new Canadian filing does this create?

Form T1135, but only where the place isn’t personal-use, and for many people it’s the first time the question arises at all. Specified foreign property includes “tangible property, or for civil law corporeal property, situated outside Canada” (ITA s. 233.3(1)), so a US house is caught unless an exclusion reaches it, and the exclusion that usually does the work sits two hops out.

• Paragraph (p) is that exclusion and it’s seven words: “personal-use property of the person or partnership”. Paragraph (q) reaches interests in and rights to acquire such property, the list ends there, and neither carries a dollar threshold.
• “Personal-use property” isn’t defined in section 233.3, so it takes its meaning from ITA s. 54: property “used primarily for the personal use or enjoyment of the taxpayer” or a related person.
• The number attached to “primarily” is an administrative view rather than statutory text: “The CRA takes the view that ‘primarily’ means more than 50%”, and the outcome is “a question of fact” (CRA, Questions and answers about Form T1135).

CRA works this pattern on the same page: a condo used only for the owner’s vacations stays outside T1135, one rented eight months with a reasonable expectation of profit is inside, and one rented without that expectation, merely recovering expenses, stays personal-use. Paragraph (j), a narrower exclusion for property “used or held exclusively in the course of carrying on an active business”, usually fails too.

Now the part almost nothing published gets right: the $100,000 everyone quotes isn’t part of the personal-use exclusion. It sits in the separate “reporting entity” definition, which bites where the total “cost amount to the entity of a specified foreign property of the entity exceeds $100,000” at any time in the year, other than a time when the entity is non-resident. So it runs on cost amount rather than fair market value, on any moment in the year rather than year end, and only on a “specified Canadian entity”, which a resident individual is. The order matters: the total counts only specified foreign property, so a genuinely personal-use house drops out before the $100,000 is ever added up.

Put that beside the reset: after arrival your cost amount is the freshly deemed fair market value from 128.1(1)(c) and no longer the price you paid, so a place that isn’t personal-use and sat under $100,000 on original cost can clear the threshold purely because the reset lifted its cost. Nothing about the house changed, only the measuring stick.

There’s a first-year exception and it may not be yours. ITA s. 233.7, “Exception for first-year residents”, relieves the return for “an individual (other than a trust) who first became resident in Canada in the year”, and CRA answers the same question under the heading “What is the reporting requirement for new immigrants?”. Both are written for someone becoming a Canadian resident for the first time. If you were resident here before you left, the year you first became resident isn’t this one, and neither the statute nor CRA says whether the exception still reaches a returning resident, so treat it as an open question for a practitioner rather than relief you have. What CRA does settle is the measuring stick: for a new resident the cost amount of foreign property is its arrival fair market value, used “in determining the new resident’s Form T1135 filing requirement for future years”. Either way this only bites on a place that isn’t personal-use. Take your own dates to the moving-back-to-Canada checklist and a practitioner; for older unreported US holdings, the late-T1135 route.

So should I sell before I go?

That call is yours, and it should be: the two options land in almost the same place on the Canadian side and in different places on the US side and on your own balance sheet. Here’s what each does, cell by cell.

	Sell before you become a Canadian resident	Keep it and sell once you’re resident
Canadian cost in the property	Doesn’t arise, since you don’t hold it as a resident	Reset to fair market value at the moment residence begins, under ITA 128.1(1)(c)
Canadian tax on the pre-arrival gain	None: for the non-resident part of your year Canada reaches only dispositions of taxable Canadian property, and a Florida house isn’t	None either, for that same non-resident timing reason; the reset then lifts your cost to arrival value, which keeps the pre-arrival climb out of the Canadian base on a later sale
A pre-arrival LOSS	No Canadian loss arises, for the same non-resident reason	No Canadian loss either, for that same non-resident timing reason; the reset then pulls your cost down to arrival value, keeping the decline out of the Canadian base later
The US gain or loss	Measured on your unchanged US basis, under US rules	Measured on the same unchanged US basis; Canada’s reset doesn’t move it
T1135	Doesn’t arise for a property you no longer own once you’re resident	Can arise for a place that isn’t personal-use, and the cost amount tested is the deemed arrival value; ITA 233.7 relieves the year someone “first became resident in Canada”, which is unsettled for a returning resident
US withholding at closing	Turns on whether you’re a foreign person for US purposes on that date rather than on your Canadian status	Same test at the later closing date, when your US residence is more likely to have ended and, if you’re not a US citizen, you’re more likely to be a foreign person

The Canadian entries are close to identical, which is the point. What isn’t neutral is the loss case: selling while still a non-resident of Canada leaves the decline where US rules decide whether anything can be done with it, which turns on how the property was used, while holding through the arrival date hands the Canadian side a fresh cost and no Canadian loss.

Three dates drive this and they usually aren’t the same day: the day you stop being a US resident, the day you become a Canadian resident, and the closing date. The reset and the T1135 test key to the second, and nothing on the Canadian side keys to the first, so “I’ll be out of the US by then” doesn’t move either. It does move the US side, and not the way most people hope: withholding keys to whether you’re a foreign person on the closing date, which for a non-citizen turns on whether US residence has ended by then (IRC 1445(f)(3) with IRC 7701(a)(30)). For the wider picture, see the corridor guide to buying and holding US real estate.

What should I do next?

Fix your arrival-date value first, with something defensible: an appraisal or a written broker opinion dated close to the day your Canadian residence begins. That one number sets your Canadian cost, your Canadian gain on a later sale, and your T1135 cost amount if you end up inside T1135 at all. Then price the US side, where the options actually differ.

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