US resident with non-registered Canadian investments

[NYComputerGuy]

I moved from Canada to the US in July 2009 to start a new job under TN status. For the 2009 tax year, I filed a departure return from Canada (including deemed disposition of investments on T1161) and a dual-status return in the US. I plan to stay in the US for at least the next year but my plans after that are uncertain.

I still have non-registered mutual funds worth about $50k split between two different Canadian brokers. I just informed one broker that I was a non-resident and they said they had no choice but to close my account because they were not licensed to work with US clients.

Two questions:
* Are there any Canadian brokers that will accept US clients? I would prefer to avoid the hassle and expense of currency conversion and opening a brokerage account in the US.
* How do I report any dividends paid so far on my 2010 returns? How do I pay the non-resident withholding tax to Canada?

This forum is a great resource and was a big help to me when I worked on my 2009 returns.

[nelsona]

Cdn brokers are not allowed to deal with US residents when it comes to non-retirement plans. Since the mutual funds can't be transferred to a US broker, they must now be sold. Stock could be transferred.

You should send a cheque for the 15% dividends recieved IF they are true dividends. If they are merely capital gains dividends or interest, no NR tax is owed.

All these distributions would be taxable in US in any event, as will the sale of the mutual funds, subject to the rules of IRS REv. Proc 2010-19, which allows you to use the deemed distribtion value as your new cost basis.
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nelsona non grata... and non pro

[NYComputerGuy]

Thanks for the reply - what a great forum!

So you do not recommend a cross-border advisor like Pacifica Partners or Seabank Capital? Looks like I would not have enough $$$ to interest them anyways.

Not sure what you mean by "true dividends". I have a bond fund that reports other income (box 26 on T3), a Canadian equity fund that reports dividends (box 49-51 on T3), and an international fund that reports foreign non-business income (box 25/34). On my statements they all appear as "distributions".

How do I pay the 15% tax? Is there an accompanying form?

[nelsona]

Bond funds typically distribute interest distributions. Your MF trustee will be able to tell you what type of distribution you had.

No form. You send a letter to CRA.

As to these "border-straddling" investment firms, you'd best check with them directly.

But, really, you should be moving your non-sheltered investments to US.
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nelsona non grata... and non pro

[ExpatAmerican]

Hello:

Your concerns are well-founded, and certainly commonplace these days. Although you are obliged to sell your Canadian open-end mutual funds once you become a US (tax) resident, you are not obligated to convert your C$ and convert to US$. There is always a cost to converting, and it's not much of stretch to think keeping some C$ as a hedge against the serious problems the US is facing, is probably sage advice. Now, with that said, there are Canadian-based brokers (other than Pacifica and Seabank, who focus on larger client accounts) who can help you achieve these goals. Moving your assets to the US, unless you know of a US firm that accepts C$ that I am unaware of, would entail the undesired and unneccessary currency conversion you are seeking to avoid in the first place.

Darrell Thompson at Macquarie Private Wealth Corp. (they recently acquired Blackmont) in Toronto, Canada, can deal with US residents in 22 states including their cash accounts, IRA's, 401Ks, RRSPs (on the Canadian side) and allow you to buy/hold/trade both US$ and C$ investments without conversion issues. He can be reached toll-free at 866-775-7704, ext. 8007 or emailed at darrell.thompson@macquarie.com.