Moved to the USA without liquidating TFSAs

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elgoog
Posts: 81
Joined: Thu Sep 19, 2019 9:40 pm

Moved to the USA without liquidating TFSAs

Post by elgoog »

Hi all,

I recently heard about the TFSA not recognized as being tax-free by the IRS and got nervous.

1. Canadian citizen here
2. Moved to California on August 23rd, 2019 on a TN Visa
3. Unfortunately, I did not liquidate my TFSA before moving to the USA. My TFSA is maxed out at ~50K and has around ~5K CAD in capital gains through investments in ETFs and such

I wanted to ask:

1. What are my options? Should I liquidate the TFSA and close it ASAP?
2. How much tax should I expect to pay on this when I file my taxes with the IRS?

Thank you.
adeboloj
Posts: 73
Joined: Fri Mar 24, 2017 10:50 am

Re: Moved to the USA without liquidating TFSAs

Post by adeboloj »

Any luck on this, I recently heard too that better to close TFSA and am in same boat as you.
Already moved and didn't close TFSA, good thing though I only have less than 2k in the account.
I hope to close it but how about RSP, RESP as well.
Banks in Canada told me I can leave all as long as I don't contribute into these account anymore but seems its ok on Canada side but not when you file 1040 in the US.
Nelsona, any help here.

Thanks
nelsona
Posts: 18291
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Moved to the USA without liquidating TFSAs

Post by nelsona »

The TFSA, first, is treated as an ordinary account in US, so whatever taxable income it generates while your are taxable in US, must be reported on your 1040. '
Second, TFSA can be viewed as a foreign trust, requiring 3520 reporting.

Third, if your TFSA holds Cdn mutual funds or ETFs. , they are treated as PFICs, and subject to reporting and tax, even if not sold.

so, sell as soon as you can.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
elgoog
Posts: 81
Joined: Thu Sep 19, 2019 9:40 pm

Re: Moved to the USA without liquidating TFSAs

Post by elgoog »

Thank your nelsona. I just had a couple more questions:

1. By taxable income, do you mean the entire amount or just the gains that I attained?
2. Also, do you know the cost basis for the gains would be? Would it be the start of the year or the time that I moved to the USA?
3. It almost looks like I would be better off filing as 1040NR for this year since I don't pass the SPT test anyways. I know I can't claim the standard deductions but it might be less of a hassle.

Thank you again for your help.
nelsona
Posts: 18291
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Moved to the USA without liquidating TFSAs

Post by nelsona »

1. Any taxable income. Interest, dividends and gains trigeers/received after moving.
2. gains would be as normal. there is no resetting for TFSA, since it was not deemed disposed.
3. Yes, for 2019 that may be best. then make sure yoyr TFSA is closed this year.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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