Should I Wind Up My Canadian Corporation Before Moving to the US, or Keep It?

Usually, wind it up before you go, and the reason sits on the US side. Once you’re a US person, unwinding the company is a US taxable event under IRC 331, which treats a complete liquidation as an exchange for your stock, and the company drags in the CFC and Form 5471 stack every year you hold it. Separately, the CDA only comes out tax-free while you’re still a Canadian resident. Wind up first and you settle it in one year and close the file. If the company is your live business or your visa leans on it, the choice is made for you.

Should I wind up my Canadian corporation before I move, or keep it?

If you won’t need the company after the move, winding it up before you leave is usually the cleaner call. You settle the Canadian tax once, in one year, while you’re still resident, and because the company is gone before your US residency starts, there’s no US shareholder for IRC 331 to reach and no corporation left for the CFC and Form 5471 stack to attach to. Keeping it defers that tax but signs you up for annual two-country compliance and a US controlled-foreign-corporation regime. The forced-keep case, where the business is still live or tied to your status, takes the decision out of your hands.

Route	The tax event it triggers	When it’s the right call	What it costs or leaves behind
Wind up before you leave	Section 84(2) deemed dividend on the payout over paid-up capital, taxed as a dividend on your resident T1; capital gain computed on proceeds net of the deemed dividend under section 54(j), often small; CDA paid out tax-free by a section 83(2) election, RDTOH refunded to the extent the taxable dividend supports it	You won’t need the company after the move, and you can finish the wind-up before your Canadian residency ends	You pay the dividend tax now, in one year, at resident rates, and give up the deferral. In exchange, a wind-up fully completed before your US residency starts happens before there’s a US shareholder for IRC 331 to reach, and before the CFC and Form 5471 regime can attach
Wind up after you leave	The same section 84(2) deemed dividend, but now a Part XIII dividend under section 212(2)	Rarely by design. Mostly when the timing slipped or the move date was locked first and the wind-up couldn’t be finished in time	Once your US residency has started, the wind-up is a US taxable event as well. And once you’re a non-resident of Canada, paragraph 212(2)(b) puts the CDA into Part XIII, so it no longer comes out tax-free, whether or not your US residency has started
Keep it	No wind-up tax now; the shares are deemed disposed at fair market value on departure, subject to a short-term-resident carve-out, and once you become a US person the company is a CFC with Form 5471 every year	The business keeps running and you want the deferral	Annual two-country filing plus the CFC regime once you’re a US person; the CDA taxed under Part XIII when you distribute as a non-resident, and the RDTOH sitting until the company pays a taxable dividend
Forced-keep	The keep-path events, whether you like them or not	The company is your live operating business or tied to your US visa	You skip straight to managing the keep-path consequences

How does winding up a Canadian corporation actually get taxed?

Two separate events, and the first does most of the work. On a wind-up, the amount distributed to you over the paid-up capital of your shares is a deemed dividend under section 84(2) of the Income Tax Act. It’s then carved out of your proceeds when you compute the capital gain, because paragraph (j) of the “proceeds of disposition” definition in section 54 removes any amount already deemed a dividend under subsection 84(2). So the value over paid-up capital leaves as a dividend, and the share disposition often nets to little.

The wind-up numbers	Figure	Source
Amount distributed	$600,000	Hypothetical
Paid-up capital of the shares	$100,000	Hypothetical
Section 84(2) deemed dividend	$500,000	ITA 84(2)
Proceeds of disposition, net of the deemed dividend	$100,000	ITA 54(j)
Adjusted cost base	$100,000	Hypothetical
Capital gain	nil	ITA 54(j)

Why does it matter whether I wind up before or after I leave Canada?

Two separate dates drive this. While you’re a Canadian resident, the section 84(2) dividend goes on your T1 with the gross-up and credit. After you’ve left, section 212(2) taxes it at 25%, treaty-reduced to 15% for a US-resident individual who claims it. Once you’re a US person, the liquidation is a US taxable event under IRC 331. Separately, from the day you’re a non-resident of Canada, paragraph 212(2)(b) takes the CDA’s tax-free character, whether or not your US residency has started.

Section 212(2) reaches what Part I deems a corporation to pay a non-resident, so the 84(2) dividend lands in Part XIII.

What happens to my GRIP, CDA and RDTOH balances if I wind up?

Deal with all three before you go. The company elects under section 83(2) and the CDA comes out tax-free; pay it after you’ve left and paragraph 212(2)(b) puts 25% Part XIII tax on a capital dividend paid to a non-resident, before any treaty relief, which for a capital dividend is its own question. RDTOH is only refunded when the corporation pays a taxable dividend as a private corporation (section 129(1)), so a balance sits unrefunded if the wind-up never pays one. GRIP sets the deemed dividend: eligible up to the corporation’s GRIP, non-eligible beyond, designated in writing under section 89(14).

Does winding up before I leave get me out of the US CFC and Form 5471 regime?

Yes, if the wind-up is fully completed before you become a US person. With the corporation gone before your US residency begins, there’s nothing left to be a CFC, so no Form 5471 and no yearly pickup of net CFC tested income under IRC 951A.

The regime attaches to a foreign corporation you still control when you become a US person, at which point it’s a CFC and you its US shareholder (IRC 957(a)). Keep it across the move and it switches on.

The rest of the keep-path consequences, lost CCPC status, the Form 5471 stack and the permanent-establishment trap, live on the guide to keeping your Canadian corporation.

What if I can’t wind up? The forced-keep case.

Sometimes winding up isn’t on the table. If the corporation is your live operating business, or your US immigration status leans on it staying open (an E-1 or E-2 treaty-investor position, say), you can’t close it just to skip the filings. The decision is made for you, and you move straight to managing the keep-path: the shares are deemed sold at fair market value the day you leave (a short-term-resident carve-out can apply, and the departure-tax guide carries that math), and once you become a US person the company runs as a CFC. A third path, folding the business into a US or Canadian structure by rollover or reorganization, exists and is its own analysis.

What should I do next?

Pin down three dates first: when you’ll stop being a Canadian resident, when your US residency starts, and when the corporation’s assets actually come out. If the wind-up lands even a day after your departure, the payout runs through Part XIII and the tax-free CDA is gone. Clear the CDA while you’re still resident, check that the wind-up pays a taxable dividend so the RDTOH balance gets refunded, and sequence the whole thing against your move using the leaving-Canada checklist, in date order. Then get the deemed-dividend split checked against your own share register before you commit.

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