Reporting TFSA income in the US - reportable loss or not?
Moderator: Mark T Serbinski CA CPA
Reporting TFSA income in the US - reportable loss or not?
With the TFSA holding a security that is not liquid, I seem to have no other choice but to report it on US tax return. I cannot sell it and close the account.
The security lost value in 2013, so now when I start reporting it, I stand to pay taxes on returns even as it goes back up to the original value.
Is there a way to use book value or purchase cost as a "cost basis", so I don't get dinged in the US for what I paid tax in Canada already?
Thank you.
The security lost value in 2013, so now when I start reporting it, I stand to pay taxes on returns even as it goes back up to the original value.
Is there a way to use book value or purchase cost as a "cost basis", so I don't get dinged in the US for what I paid tax in Canada already?
Thank you.
A TFSA is like any other account i neyes of US (except for all the extra foreign trust reporting -- welsom to that nightmare).
So, the cost basis is its original cost basis. You would have needed to crystalize its values before leaving.
And since TFSA are not subject to deemed disposition, you cannot use that aspect of the treaty to re-set your cost basis to moving day.
Note that a similar thing would need to be done in one's RRSP before leaving canada in order to lower the amount of future US tax on the RRSP growth.
So, the cost basis is its original cost basis. You would have needed to crystalize its values before leaving.
And since TFSA are not subject to deemed disposition, you cannot use that aspect of the treaty to re-set your cost basis to moving day.
Note that a similar thing would need to be done in one's RRSP before leaving canada in order to lower the amount of future US tax on the RRSP growth.
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Unless the TFSA "trustee" (there's a dead giveaway) says specifically that your account is not a trust as defined by IRS, its a foreign trust. Its the account, not what's in it.
Apart from FBAR and trust reporting you also have PFIC and foreign asset considerations, based on what is IN the account.
Apart from FBAR and trust reporting you also have PFIC and foreign asset considerations, based on what is IN the account.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
I called them and tried to get a definition from them, the only thing I got is that they interpret it as "not a trust" but they cannot claim it in terms of IRS definition.
They said it is possible to do withdrawal-in-kind and then a contribution-in-kind into an RRSP account, and then close the TFSA account, which somehow they did not mention last year as an option.
They said it is possible to do withdrawal-in-kind and then a contribution-in-kind into an RRSP account, and then close the TFSA account, which somehow they did not mention last year as an option.
That will require an RRSP trustee that is willing to deal with you. TD waterhouse is one that is favourable to US clients. Sometimes they are not willing to take new RRSP money (ie only accept RRSP transfers).
You also need to have suficient RRSP contribution room.
Can I ask why this investment simply can't be sold?
You also need to have suficient RRSP contribution room.
Can I ask why this investment simply can't be sold?
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Well then your move to US may help you in the long run! Since this lost was never going to be able to be reported on a Cdn return, your move has suddenly made it possible -- IF you can sell.
The better quaestion to ask though is whether a US broker would aggree to handle those shares (?). This would avoid the RRSP jump. The ral problem is that you are not allowe to have a non-sheltered account in canada when living in US (That may ne whey the suggestion is either keep in TFSA or move to RRSP).
If you can get a US broker to transfer these to a US account, then your account problems and tfsa poblems are solved.
Then you just have to wait and sell.
Do these shares have a price?
The better quaestion to ask though is whether a US broker would aggree to handle those shares (?). This would avoid the RRSP jump. The ral problem is that you are not allowe to have a non-sheltered account in canada when living in US (That may ne whey the suggestion is either keep in TFSA or move to RRSP).
If you can get a US broker to transfer these to a US account, then your account problems and tfsa poblems are solved.
Then you just have to wait and sell.
Do these shares have a price?
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
But given the choice to have these in a TFSA or an RRSP, I would choose RRSP, as US recognizes these.
I'm aslo wondering if -- for US tax purposes -- the move from the TFSA to RRSP would in effect crystalize your losses. they don't in canada only because the TFSA is non-taxable. were these shares held unsheltered, the transfer would have triggered the loss in Canada.
I get the sense that IRS would accept that atransfer from TFSA to RRSP would be a sale, since they view RRSP as a trust. but that is way above my amateur paygrade.
I'm aslo wondering if -- for US tax purposes -- the move from the TFSA to RRSP would in effect crystalize your losses. they don't in canada only because the TFSA is non-taxable. were these shares held unsheltered, the transfer would have triggered the loss in Canada.
I get the sense that IRS would accept that atransfer from TFSA to RRSP would be a sale, since they view RRSP as a trust. but that is way above my amateur paygrade.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
and US doesn't have proviosns to allow in-kind transfers into Retirement accounts at all, so I'm sure TFSA to RRSP would not yield a triggered capital loss.
So Iguess its left to finding a willing RRSP trustee to open an account for your and put these shares in it.
For US purposes, I would think you would NOT elect to defer taxation on that account, since this would limit your ability to claim losses in future. Just repot the RRSP on 8891 but don't make the election.
So Iguess its left to finding a willing RRSP trustee to open an account for your and put these shares in it.
For US purposes, I would think you would NOT elect to defer taxation on that account, since this would limit your ability to claim losses in future. Just repot the RRSP on 8891 but don't make the election.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
That is also how you should treat the RRSP you sold in 2013, report it on 8891 but don'r take the election, that allows you to just report whatever income the sale triggered, along with any income it genrated during the year, prior to your sale.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing