How we help
- Section 128.1 deemed-disposition analysis for all categories of property
- Election to defer payment (Form T1244) with adequate security
- Excluded-property categorization (TCP, RRSP/RRIF, employer stock options)
- Pre-departure cost-base step-ups and corporate reorganizations
- Returning-resident rule (subsection 128.1(6)) for round-trip migrations
- Coordination with US pre-immigration cost-base planning
What departure tax actually is
Under Section 128.1 of the Income Tax Act, an individual who ceases to be a Canadian tax resident is deemed to have disposed of most kinds of property at fair market value the moment before they emigrate, and to have re-acquired it at that same value. The resulting accrued gains become taxable in the year of departure — even though no property has actually been sold.
The deemed disposition catches most categories of capital property: publicly-traded shares, private-company shares, partnership interests, art, jewellery, cryptocurrency, and even some non-Canadian real estate. It does NOT apply to taxable Canadian property (TCP) — chiefly Canadian real estate and shares of certain private corporations whose value is derived from Canadian real estate — and a number of statutorily excluded categories like RRSPs, RRIFs, TFSAs, employer stock options on Canadian employment, and Canadian pension entitlements.
The planning window
The planning window for departure tax closes the day you cease residency. Many planning moves — pre-departure cost-base step-ups using Section 85 rollovers, accelerating dispositions of property with accrued losses, post-emigration butterfly transactions to extract retained earnings from a holdco, the use of family trusts to fragment ownership before the move — only work if executed before the residency change.
Departure is a question of fact, not just intention. The CRA looks at residential ties (home, spouse, dependants), secondary ties (driver's licence, health card, club memberships, bank accounts), and the relevant treaty if the destination country is one of Canada's tax-treaty partners. A clean cessation of residency under domestic law combined with the application of a tie-breaker under the relevant treaty produces the most defensible position.
Deferring payment with security
If the departure tax bill is large relative to liquid assets, an individual can elect under Section 220(4.5) to defer payment of the departure-tax liability by posting acceptable security with the CRA — typically a letter of credit, a charge on real estate, or pledged securities. The election is made on Form T1244 with the departure-year return. The deferred amount becomes payable when the deemed-disposed property is actually sold (or earlier on certain events).
If you come back: the returning-resident rule
Subsection 128.1(6) lets a returning resident "unwind" the departure tax if the property at issue is still owned at the time residency resumes. The election effectively treats the original deemed disposition as if it never happened, restoring the original cost base. The mechanic only works for property the taxpayer continuously owned across the departure period — which is one of several reasons round-trip migrants should think carefully before selling pre-departure-assessed holdings.
How we work the file
Most departure-tax engagements involve at least three workstreams: (1) cataloguing every asset and classifying it as deemed-disposed or excluded; (2) modelling the tax liability under different planning scenarios; and (3) preparing the departure-year T1 and Form T1244 election if deferral is wanted. Where the destination is the US, the second workstream usually expands to include pre-immigration cost-base planning so the same gain isn't taxed twice on the US side.
What to expect when you call us
Your first call is a free, no-obligation consultation with a tax lawyer. We will review the details of your situation, explain your options under the Income Tax Act and CRA administrative practice, and give you a clear, fixed-fee quote if you choose to retain us. Your consultation is confidential, and once we are retained, communications are protected by solicitor–client privilege.
If you retain us, we begin work within 24 hours of being retained.
Frequently asked questions
Is the consultation really free?
Yes. Most cases qualify for a free, no-obligation consultation with one of our tax lawyers. During the call we'll review your situation, explain your options, and give you a clear quote if you decide to retain us.
Do you serve all of Canada?
Yes. Barrett Tax Law represents clients across Canada. We have offices and local phone lines in Toronto, Calgary, Edmonton, Fort McMurray, Ottawa, Vancouver, and Winnipeg, plus a national toll-free line at 1-877-882-9829.
What does a tax lawyer do that an accountant cannot?
Accountants prepare returns and financial statements. Tax lawyers represent you when those returns are challenged, audited, or prosecuted — and our communications are protected by solicitor–client privilege, which accountant communications generally are not.
Will the CRA criminally prosecute me?
Most CRA disputes are civil. Criminal prosecution is reserved for serious tax evasion or fraud, usually involving deliberate misrepresentation. If you have unreported income, a voluntary disclosure is one of the standard ways to reduce criminal-prosecution risk.
How fast can you start on my case?
We typically begin work within 24 hours of being retained. For audit deadlines, Notices of Objection, and other time-sensitive matters, we move immediately.
What if I have unfiled tax returns from many years ago?
We routinely handle 5+ years of unfiled returns. Through the Voluntary Disclosures Program — applied for before the CRA contacts you — we can usually eliminate gross-negligence penalties and limit interest exposure.