How we help
- Step-up at residency under ITA s. 128.1(1)(b) — deemed acquisition at FMV
- Exception categories (Canadian real property, business interests carried on in Canada)
- Pre-immigration trust planning for high-net-worth families
- Coordination with US exit-tax (IRC s. 877A) where leaving the US
- RRSP / 401(k) / IRA contribution and rollover analysis
- Foreign-affiliate planning before the move
The cost-base reset
Paragraph 128.1(1)(b) of the Income Tax Act provides that when a taxpayer becomes resident in Canada, they are deemed to have acquired most of their non-exempt property at fair market value at the time residency begins. This is a one-time cost-base reset for Canadian tax purposes. Accrued gain that built up before residency is not taxed by Canada when later realized; only post-immigration appreciation is.
The reset applies to property that is NOT taxable Canadian property (TCP). For TCP — Canadian real estate, Canadian-resource property, shares of certain private Canadian corporations — there is no step-up; the original cost base carries forward. For everything else (foreign shares, foreign mutual funds, US real estate, foreign brokerage accounts, crypto, business interests outside Canada, art), the new cost base is the fair market value on the date residency begins.
Why the timing matters
Because the reset happens at the moment residency begins, the question of when residency begins becomes important. Canada determines tax residency primarily by reference to residential ties (home, spouse, dependants), not by a bright-line day count. A Canadian who arrives on January 15 with their family, signs a long-term lease, registers for OHIP, and starts work has commenced residency on roughly that date. The fair market value of their worldwide assets on that date is the cost base going forward.
If valuations are unclear — closely-held company shares, illiquid private investments — locking in a contemporaneous valuation BEFORE the residency date avoids a CRA challenge years later. Independent appraisals dated as close to the residency date as possible are inexpensive insurance.
What the reset doesn't cover
The reset does NOT change foreign tax exposure. A US citizen moving to Canada remains a US tax filer (citizenship-based taxation), and the resident-departure rules of the US side may apply when the green card is given up. Coordinating the Canadian step-up with the US exit-tax under IRC section 877A is its own analysis.
For non-US citizens who held US-situs assets before immigration, the assets remain subject to US estate tax on death (see the US Estate Tax for Canadians page) — the Canadian step-up doesn't change US-side situs analysis.
Pre-immigration trusts
For high-net-worth families, a properly-constituted pre-immigration trust can hold appreciated assets outside the future Canadian resident's name, deferring or avoiding the application of attribution rules and keeping the assets outside the Canadian tax net. Section 94 of the Income Tax Act will eventually catch a trust with a Canadian resident contributor or beneficiary, but properly-structured pre-immigration trusts can produce material tax savings over a long horizon.
How we work the file
Pre-immigration engagements start at least 60–90 days before the planned residency date. We catalogue assets, identify what's eligible for the step-up and what isn't, lock in valuations where needed, set up any pre-immigration trust structures, and coordinate the departure-country side (often US exit-tax or US-exit information returns). After residency begins, we handle the first-year Canadian T1 in coordination with the final departure-country return.
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.
What does a tax lawyer do that an accountant does not?
A tax lawyer focuses on the legal side of tax — disputes, litigation, and the structuring of transactions in light of the law and anti-avoidance rules. That includes representing taxpayers in CRA audits and objections, appearing at the Tax Court of Canada, defending penalties and director or derivative liability, and designing reorganizations such as section 85 rollovers and estate freezes.
The most practical distinction is privilege. Communications with a lawyer are generally protected by solicitor-client privilege, while communications with an accountant generally are not and can be demanded by the CRA. Where the facts are sensitive or the matter could become contentious, that protection matters.
Lawyers and accountants often work together — the accountant on the numbers and filings, the lawyer on strategy, privilege, and the legal record. Barrett Tax Law regularly coordinates with a client's existing accountant.
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.
Who is Barrett Tax Law and what areas does the firm handle?
Barrett Tax Law is a Canadian boutique tax law firm that represents individuals and businesses in their dealings with the Canada Revenue Agency. The firm's work spans CRA audits and disputes, voluntary disclosures, Tax Court of Canada litigation, collections matters, and corporate and estate tax planning.
The firm was founded in 2009 and has represented many thousands of clients across Canada. Its head office is in Concord, Ontario (Vaughan), and it serves clients nationwide. You can reach the firm toll-free at 1-877-882-9829 (1-877-8-TAXTAX).
Most matters qualify for a free, no-obligation consultation, and most are quoted on a fixed-fee basis once scope is understood, so the cost is known before work begins.
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.
What should I do if I receive a letter from the CRA?
First, identify what the letter is and what it requires. A CRA letter may open an audit, ask for documents, propose adjustments (a proposal letter), confirm a reassessment, or start collection action — and each carries its own deadline and its own implications. Note any date by which a response is required.
Do not ignore it, and be careful about responding off the cuff. What you say and produce can shape your later objection and appeal position, and casual admissions can be difficult to undo. If the letter proposes adjustments or penalties, or if significant amounts are involved, get advice before responding.
A free consultation can help you understand the letter, the deadline, and the right next step. Acting early — while options are still open — is usually far better than waiting until a deadline is near.
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.
Is the first consultation really free?
Yes. Most matters qualify for a free, no-obligation consultation with an experienced tax lawyer. The consultation is a chance to describe your situation, get a clear sense of the options and likely path, and receive a fee structure in writing before you commit to anything.
You can reach the firm toll-free at 1-877-882-9829 (1-877-8-TAXTAX) to arrange a confidential consultation. The head office is in Concord, Ontario (Vaughan), and the firm serves clients across Canada.
Are my communications with a tax lawyer confidential?
Yes. Communications between you and your lawyer for the purpose of obtaining legal advice are generally protected by solicitor-client privilege, one of the most strongly protected confidences in Canadian law. In practical terms, the CRA generally cannot compel disclosure of privileged communications.
This is an important difference from working with an accountant or other non-lawyer representative, whose communications and working papers can generally be demanded by the CRA. Where the facts are sensitive — unreported income, offshore assets, or potential penalties — that protection can be significant.
Privilege has limits and can be waived inadvertently, so it should be handled with care. A consultation can explain how privilege applies to your particular situation.
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.