Transferring $$ from U.S. to Canada

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kesrd
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Joined: Mon Mar 02, 2009 5:19 pm

Transferring $$ from U.S. to Canada

Post by kesrd »

I am a Canadian citizen, working in the U.S. since 1998, first on TN then GC since 2005. I declared myself a non-resident of Canada for taxation purposes in 1998, and have filed U.S. taxes since that time. Over the years I have accumulated significant savings in my U.S. bank accounts (about $100,000). I intend to return to Canada permanently within the next two years. I live close to the border, and deposit funds into my Canadian chequing account occasionally when I visit - but especially when the exchange rate is favorable for U.S. to Canadian dollar transactions. The rate is favorable right now, and I am thinking about transferring a large sum which would then be available to me when I move back to Canada permanently. What are the tax implications of these transactions? Is is better for me to transfer money now, or wait until I am once again a Canadian resident? I apologize if this question has been asked previously, but I did search the previous posts for answers, to no avail.
nelsona
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Post by nelsona »

There are absolutely no tax implications to making such a transaction.

If I might suggest customhouse.com has a great vehicle for transferring funds between US and Cdn accounts. The exchange rate is better than you will get at any Cdn bank. You know, of course to NEVER make a currency exchaneg at a US bank as the fees are attrocious.

Down the road, you may end up with a capital loss or gain on the currency you keep in Canada, but that isn't much of a concern.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
kesrd
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Joined: Mon Mar 02, 2009 5:19 pm

Post by kesrd »

Under what kind of circumstances would I have a capital loss or gain? I'm also curious what you mean when you say it "isn't much of a concern." I hope to eventually use the $$ deposited in my Canadian account to purchase a home in Canada. If I had to pay capital gains on a currency withdrawal for a transaction that large, I'm thinking it could cost me quite a bit (?).
nelsona
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Post by nelsona »

Well, you will only pay cap gains tax, if you make a gain, so that is why it would not be much of a concern.

If you want to 'time' sending money up to canada to take advantage of currency rates, then that is the price to pay.

If you move say, US$100K to Cdn funds now (and it doesn't have to be t oCdn bank, any such conversion to foreign currency would create the same situation), which would now be CAD$80K and then, when you go to use that money later, that CAD$80K is now worth US$110K, then you would have a $10K gain, subject to cap gain tax in US.

Likewise, if when you use the money the exchange rate is such that those funds you pull out of Cdn dollars to buy a home are only worth US$90K, you'll have a cap loss of $10K.

You have to look at Cdn cuurency as a 'fund' that you are buying (when you sell something to buy it), and selling (when you use it to buy something).
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
kesrd
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Joined: Mon Mar 02, 2009 5:19 pm

Post by kesrd »

I am still not clear on when/how/to whom capital gains or losses are reported in this situation. As an example, I have probably deposited 30-40K U.S. into my Canadian bank account over the years, almost always at a gain, and then subsequently spent it in Canada on a variety of things (from vacation expenses to paying off my credit line at a Cdn bank). In other words, after I had deposited the american $ into my cdn account, I just spent the money in Canada and never thought about it again. Are you saying I should have been reporting the gain on the currency exchange on my U.S. taxes? If that is the case then I have 10 years of mistakes to somehow correct...
nelsona
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Post by nelsona »

The gain does not come from the exchage rate itself. Transferring 1USD and getting 1.20 Cdn is not a capital gain.

Transferring 1 USD today, and then using the 1.20 later ia year from now when it is worthe $1.20 US is what creates a cap gain or loss.

You need to treat Cdn dollars as if the are a stock or commodity. You put something into your Cdn bank account 9wehter it is by exchanging US dollars or by selling something in canada) you are, in effect, buying a 'fund' called 'Cdn dollars' each purchase can be translated into a USD equivalent based on the exchaneg rate that day. Same when you decrersae your Cdn bank account (by buying something (anything) with it, or by exchanging some of it for other currencies).

So, your cdn dollar bank account, in the eyes of IRS, is like any other investmnet account you might have. Thus the need to know what the 'cost' in USD of thoise dollars is, as well as the 'proceeds' when you dispose of those funds.

And that is whery there is $200 floor below which one does not have to report any gain on a transaction. Otherwise you would need to track everything.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
kesrd
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Joined: Mon Mar 02, 2009 5:19 pm

Post by kesrd »

Ah...I think I get it now.

I can't imagine how people deal with this over the long term if they move back to Canada with significant savings that are converted into cdn $ like I am planning to do. Theoretically it could take years to spend that money, even with fairly large transactions. I guess it also depends on how long I will have to file U.S. taxes after moving back to Canada. Some long time U.S. residents have to file for many years after returning to Canada - is that correct? Would there be any way to make some kind of single transaction and pay all of the capital gains/losses at one time and be done with it?
nelsona
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Post by nelsona »

I think you are making more of this than is worth.

The issue only arrises when one makes a LARGE disbursement from a Cdn bank account which you finded far in the past AND there has subsequerntly been a large currency shift. This was never an issue until the huge swings we've had in the past 2 years.

If you are that concerned about this, simply keep your money in USD until you are ready to use it, then convert it and use it. This would not trigger any cap gains or loss.

But it's two-edged, as you can see. It also provides an opportunity to recoup losses if you have timed your currency exchanges poorly.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Spenceredith
Posts: 1
Joined: Mon May 24, 2021 3:20 am

Re: Transferring $$ from U.S. to Canada

Post by Spenceredith »

You have to declare yourself first the resident of Canada. The reason is that you have to pay the transferring fee on https://www.assignmentgeek.com.au/proof ... -services/ you can read the rules so must go there to read the details about these kind of cases.
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