TFSA closed before moving to US

[gnham]

Hello!
I will be moving to the US in June 2015 with my spouse, on TN status.

I am a shareholder in my parents' medical corporations, which will issue dividends annually.

In the next month, we plan to:
- Contribute to my RRSP, and use the deduction in the 2014 year
- Contribute to her RRSP, and not use the deduction until we return to Canada someday (she has no tax to pay for 2014)
- Close the TFSAs

For 2015, we will file:
- Emigrant tax returns in Canada, for our (small) incomes before we leave
- 1040MFJ in the United States, for our (larger) world income for the year, along with form 2555 to exempt the Canadian income, and 8938 to satisfy reporting requirements
- FBAR.

Questions:
1. Do we need to report or file anything for the RRSP and TFSA transactions that happen before we emigrate?
2. Do we need to report the TFSA at all on the USA tax return? Do we need to file a form 3520 for it? Do we include it on the FBAR and 8938?
3. What do I do about the shares and dividends in the medical corporation?

Thanks as always!

[nelsona]

I would question the value of making having souse make a contribution to her RRSP, let alone a non-deductible one. You will most likely be collpsing your RRSP before yoe (presumably) come back to canada, so better to put that money in sheltered (and even tax-free) US investments than in heavily taxed RRSPs. Even YOUR contributions should only be made if you are in a higher tax bracker than say 25%.

As to your TFSA, unfortuantely you will still have PFIC, 3520 and 8938 consierations for this account (you would not if you hasd closed it in 2014) as well as any other mutual funds and ETFs you might have. These are all FinCEN reportable too.

Don't forget that your emigrant tax will include deemed dispostion on your private shares (and any other holdings), and yourparents should be careful as these shares held by a non-resident could jeopadize the Cdn-controlled status of the company. You do not get the personal ammount for 2015, so you will have Cdn tax regardless of how small your income is.

For US purposes, keep in mind that 2555 is only for WAGES and self-employed, not any other types of foreign income. you will most likely be using 255 and/or 1116 for your Cdn income. I do agree that 1040MFJ will be best.

Note that your RRSPs must be hld by a broker allowed by SEC to deal with you in your new state. Most "bank" RRSPs and mutual fund dealers are not. TD waterhouse is one of the few. get this ironed out before leaving.

You cannot keep Cdn broker for non-RRSP accounts.

[nelsona]

I szee you have been in US before, so I'll asume that you knew most of the requirments for accounts etc.

[gnham]

Thanks, Nelson. I try to keep on top of things, although it seems that every year something changes.

In terms of the RRSP:
- If I keep the RRSP and retire in Canada, should I generally expect to pay more than 25% at that time? It seems that I could keep it to 15% in a fairly straightforward way by converting to an RRIF?
- Is it too late for me to sell off the winners in my RRSP to adjust the cost basis? If not, then it seems I will be obligated to pay even more than 25%?

[nelsona]

1. If your keep any RRSP or RRIF to retirement age and retire in Canada You will pay the marginal rate in effect at the time, not a flat rate, which is sure to be more than 25%. The 15% RRIF rate is for US residents, and only applies to annual payouts of less than 10%.
2. If you file full-year, the book value will already be established on Jan 1, 2015.

As I said, open yourself to the many better investment vehicles in US.