What is the best recommended way for U.S. expats in Canada to invest in mutual funds while avoiding PFICs?
-Do we have to purchase shares in U.S. equities only, one by one?
-What about ETFs?
-Would a broker manage such safe investments or does each individual put together his own portfolio of U.S. equities and manage them himself?
-If the expat purchases only U.S. equities, how does he/she report them - presumably not form 8621 ??? Perhaps only 8938?
In other words, how to avoid form 8621....
Any ideas?
Thanks.
Investing without PFIC -form 8921
Moderator: Mark T Serbinski CA CPA
Hi - there is a lot of information in this post
http://forums.serbinski.com/viewtopic.php?t=9102
It sounds like you would be interested in a portfolio of US listed ETFs. Your Canadian brokerage will provide you with 1099-divs.
Keep in mind that US listed ETFs are held in US dollars, so make sure you have an efficient way to deal with the currency exchanges. Many articles on this in the "Canadian Couch Potato" website.
Best Regards.
http://forums.serbinski.com/viewtopic.php?t=9102
It sounds like you would be interested in a portfolio of US listed ETFs. Your Canadian brokerage will provide you with 1099-divs.
Keep in mind that US listed ETFs are held in US dollars, so make sure you have an efficient way to deal with the currency exchanges. Many articles on this in the "Canadian Couch Potato" website.
Best Regards.
------------------------------
MGeorge is neither an accounting nor taxation professional.
MGeorge is neither an accounting nor taxation professional.
Thank you, MGeorge. I will follow up on your advice and research these possibilities immediately. I'm glad to have a list of hopeful possibilities for investment.
Unfortunately, Financial Planners here in Montreal don't have a clue about anything except Canadian Mutual Funds and they are so eager to promote these. They seem oblivious to the fact that expats would have to face the nightmare of PFIC reporting and they try to trivialize the consequences of such reporting.
Unfortunately, Financial Planners here in Montreal don't have a clue about anything except Canadian Mutual Funds and they are so eager to promote these. They seem oblivious to the fact that expats would have to face the nightmare of PFIC reporting and they try to trivialize the consequences of such reporting.
Yes - many financial planners only sell mutual funds because they get the trailer commissions from the funds. If you want a PFIC free portfolio of US based ETFs, you will have to use a self directed brokerage, or use a fee only financial planner to manage the account for you.
------------------------------
MGeorge is neither an accounting nor taxation professional.
MGeorge is neither an accounting nor taxation professional.
Thanks again, MGeorge. I will try to find such a brokerage firm or else work with my financial planner on a fee-only basis. Unfortunately, my financial planner has no clue and no motivation to sell anything but his usual Canadian-based mutual funds. Do I look for a Brokerage Firm? Any recommended names?
So complicated.
So complicated.
You're welcome. Any of the big bank brokerage firms should work fine. I use CIBC Investor's edge. One thing you might want to consider when looking for a brokerage firm - how do they handle US investments?
I use CIBC Investor's edge - and, although I can buy and sell US ETFS in my taxable account and RRSP, it is only the taxable account that lets me settle trades in US dollars. Do some research on any fees the brokerage will charge you for buying US dollar denominated funds using Canadian dollars. I've found some techniques for minimizing even eliminating these fees. Google "Canadian Couch Potato" and read some info on US ETFs and avoiding currency exchange costs.
BMO investorline and RBC direct investing have US dollar registered accounts. This might be more convenient for using US ETFs. TD might offer this as well.
I use CIBC Investor's edge - and, although I can buy and sell US ETFS in my taxable account and RRSP, it is only the taxable account that lets me settle trades in US dollars. Do some research on any fees the brokerage will charge you for buying US dollar denominated funds using Canadian dollars. I've found some techniques for minimizing even eliminating these fees. Google "Canadian Couch Potato" and read some info on US ETFs and avoiding currency exchange costs.
BMO investorline and RBC direct investing have US dollar registered accounts. This might be more convenient for using US ETFs. TD might offer this as well.
------------------------------
MGeorge is neither an accounting nor taxation professional.
MGeorge is neither an accounting nor taxation professional.
I will visit those bank brokerage firms over the next few days and weeks. Also, I will check "Canadian Couch Potato." Right now I will park some funds in a high interest savings account -- a temporary arrangement till I can safely and wisely purchase ETFs.
By the way, Peoples' Trust is offering 1.8% interest rate on any e-savings account. This surprises me as they haven't dropped the rate though the Bank of Canada recently cut rates. Tangerine (ING) cut its rates from 1.5% to 1.05%.
Thanks.
By the way, Peoples' Trust is offering 1.8% interest rate on any e-savings account. This surprises me as they haven't dropped the rate though the Bank of Canada recently cut rates. Tangerine (ING) cut its rates from 1.5% to 1.05%.
Thanks.
That sounds like a good plan.
One thing to think about: While avoiding form 8621 due to the complexity alone is quite understandable, there might be some cases where you want want to hold one or a few canadian mutual funds and ETFs and just "bite the bullet" on form 8621.
I file on line and each year I typically file 4 form 8621. This year 2/4 are QEF elections and 2/4 are Mark-2-Market elections. There is a lot of help on this site to figuring out how to do this. Although the tax treatment can be rough using Mark-2-market election, there are some cases such as a Canadian Bond ETF (XBB) where a mark-2-market election has almost no negative impact on the amount of US tax exposure. Something to think about.
...and there are other cases where form 8621 can be a total nightmare, such as a mutual fund investment with several holding periods, regular purchases and no 8621 elections going back a few years....
One thing to think about: While avoiding form 8621 due to the complexity alone is quite understandable, there might be some cases where you want want to hold one or a few canadian mutual funds and ETFs and just "bite the bullet" on form 8621.
I file on line and each year I typically file 4 form 8621. This year 2/4 are QEF elections and 2/4 are Mark-2-Market elections. There is a lot of help on this site to figuring out how to do this. Although the tax treatment can be rough using Mark-2-market election, there are some cases such as a Canadian Bond ETF (XBB) where a mark-2-market election has almost no negative impact on the amount of US tax exposure. Something to think about.
...and there are other cases where form 8621 can be a total nightmare, such as a mutual fund investment with several holding periods, regular purchases and no 8621 elections going back a few years....
------------------------------
MGeorge is neither an accounting nor taxation professional.
MGeorge is neither an accounting nor taxation professional.
I just finished reading an excellent article on investing in mutual funds in Canada at http://www.alokeghosh.com/ . This article has been written by Dr. Aloke Ghosh who is a member of Canadian Accounting Association. I feel that article would definitely help you. Please read once!
