Taking stab at 3520, -A for TFSA

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sunnysga
Posts: 25
Joined: Sat Mar 15, 2014 4:59 pm

Post by sunnysga » Mon Feb 16, 2015 5:46 pm

Buddy-When you closed out your TFSA, did you then complete a form 8949 and a schedule D?

sunnysga
Posts: 25
Joined: Sat Mar 15, 2014 4:59 pm

Post by sunnysga » Mon Feb 16, 2015 5:59 pm

kylewkemp-
For 3520-A, Part III, this is what I do each year:

In column (b), I put the beginning balance of my TFSA (converted US $) as "other marketable securities - line 6). This is also the same $ value that would be on the previous year's ending balance as of 12/31 using the exchange rate of that year.
I total assets on line 11 - in my case, I just use the line 6 amount.

In contributions to trust corpus, column b, I use last years value from column d.
To come up with line 17 for column d, I add the value of column b line 17 to the amounts from F3520, Schedule B line 13 total.

On line 21, I put the balance in US dollars of the value of the account as of 12/31, which is the same as the value on line 11 above. The difference between line 21 and line 17 goes on line 18. Since column b uses last year's exchange rate because you are carrying over last year's ending information, and column d uses this year's exchange rate, line 18 automatically incorporates any exchange rate differences.

oswaldle1
Posts: 7
Joined: Mon Feb 16, 2015 7:37 pm

Post by oswaldle1 » Mon Feb 16, 2015 7:55 pm

i see the bad mix of TFSA and living across the border as a canadian. I came in US last year and i didn't cancel my account at that time. I did it after i started reading hundreds of posts (thanks a bunch nelsona!!!). I didn't do my taxes yet, but if i close my TFSA now an i didn't o the taxes, do i need to fill out the 3520 form? I would say no, but perhaps they will ask me if i had an account at the time i entered US.... hmmm....

Buddy
Posts: 16
Joined: Sun Dec 08, 2013 9:50 pm
Location: British Columbia

Post by Buddy » Tue Feb 17, 2015 1:03 am

Sunysga:
I did not file Form 8949 or Schedule “Dâ€￾ since the TFSA which I closed was a “cashâ€￾ account and there were no capital gains or losses involved, only interest income, which I reported on Schedule “Bâ€￾.

Buddy
Posts: 16
Joined: Sun Dec 08, 2013 9:50 pm
Location: British Columbia

Post by Buddy » Tue Feb 17, 2015 11:52 am

oswaldle1:
If your TFSA is structured as a trust, properly you would fill out the 3520/3520-A combination, checking, in your case, both the “Initialâ€￾ and “Finalâ€￾ return boxes. The most important thing, however, is that any income from the TFSA be reported (usually on 1040 schedule “Bâ€￾), and if that income is reported, the substantive purpose of these forms will have been fulfilled.

Not all TFSAs are structured as trusts, however. Check your “terms of accountâ€￾. If your TFSA is not structured as a trust, it may be treated as an ordinary bank or investment account, and 3520/3520-A are not required.

Buddy
Posts: 16
Joined: Sun Dec 08, 2013 9:50 pm
Location: British Columbia

Post by Buddy » Tue Feb 17, 2015 12:17 pm

kylewkemp:
I agree with sunnysga’s method. I’d just add for clarification that the distributions (withdrawals) are only shown in 3520-A Part II, lines 17a and 17b (not to be confused with line 17 in 3520-A Part III). Though factoring into the difference between the beginning and end of year balances, distributions are not specifically shown in Part III. A distribution is not a liability (and ordinarily there are not any liabilities with a cash account). It is correct that, with a cash account, line 1 would simply carry through on lines 11 and 21 (and 20, too).

kylewkemp
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Joined: Mon Jan 26, 2015 1:05 am
Location: California

Post by kylewkemp » Tue Feb 17, 2015 11:38 pm

Thanks Buddy and sunnysga. I see what you're saying. The value in column d line 17 then becomes a cumulative total of contributions from all previous years. Which is different from what I was thinking. I wish the instructions were more clear.

The accumulated trust income of line 18 in column d) would then inherently include the value of the withdrawals (dispositions). If you drive the balance down to 0 I guess the accumulated income can even be negative.
Kyle

nohairleft
Posts: 32
Joined: Tue Mar 04, 2014 12:16 am

Post by nohairleft » Thu Feb 19, 2015 2:41 pm

Buddy:
"Not all TFSAs are structured as trusts, however. Check your “terms of accountâ€￾. If your TFSA is not structured as a trust, it may be treated as an ordinary bank or investment account, and 3520/3520-A are not required."

Do you know, offhand, of any specific TFSAs that are not structured as trusts?

Buddy
Posts: 16
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Location: British Columbia

Post by Buddy » Thu Feb 19, 2015 11:57 pm

nohairleft:

Yes, the “Tangerineâ€￾ (formerly "ING") TFSA account is not structured as a trust. If you are interested, the terms of that account (Part “Hâ€￾) may be viewed here:
http://www.tangerine.ca/en/legal/accoun ... .html#tfsa

By way of contrast, the account terms of my current TFSA (which IS structured as a trust) are titled “Declaration of Trustâ€￾, and declare: “We agree to accept the position as trustee of the TFSA . . .â€￾ There is nothing remotely similar in the “Tangerineâ€￾ TFSA terms. There is no appointment of a trustee and the word “trustâ€￾ does not appear even once.

A trust relationship with a bank cannot arise out of thin air. Accordingly, 3520/3520-A ask that the “trust instrumentâ€￾ (i.e. the document which created the trust) be attached to the forms. If a TFSA is a trust, that trust instrument will be found within, or appended to, that TFSA’s account terms (to be found on the organisation’s website . . . somewhere).

I do not know why some banks choose to structure their TFSAs as trusts, but it was obviously unnecessary.

nohairleft
Posts: 32
Joined: Tue Mar 04, 2014 12:16 am

Post by nohairleft » Fri Feb 20, 2015 10:21 am

buddy:

That's helpful, thanks!

I wonder if the trust aspect is required to have an account in which you can hold investments. Otherwise, reading the income tax act, it says that if the TFSA is not a trust, then it can otherwise be structured as an annuity or a "deposit with an issuer" (http://laws-lois.justice.gc.ca/eng/acts ... .html#h-80).

I see that Tangerine also has tax-free investment funds, but those appear to be a different beast than the savings account link you sent above.

If it's true that the non-trust TFSAs have to be glorified bank accounts, that's not necessarily a bad thing if you were looking for a place to hold cash in your portfolio anyway. But with the meagre 1% return you're going to get, I wonder if it is really worth the paperwork bother.

uscannew
Posts: 12
Joined: Thu Mar 06, 2014 11:24 am

Post by uscannew » Fri Feb 20, 2015 11:23 am

I have a couple of questions:
Like many was unaware of the TFSA reporting issues when I moved to US at end of 2012. Once I realized how much work was involved, I closed the account in 2014. Last year, this forum was a huge help in filling out my 'initial' returns 3520/3520A for 2013 tax year. Now, am preparing 'final' return which includes the withdrawal.
Question re: 3520A
1. Part 1, Line #5 - did trust transfer any property (incl cash) to 'another person' during tax year? Am I 'another person'?
2. Page 3, Line #9 - does not say 'year end' (like it does on Part II, line 23 of 3520), but I'm assuming it is and would put 'zero'. Correct?

Finally, does anyone have experience with amended returns? In the prep of 2014 forms, I was pulling EOY info from 2013 BS and realized I made an error on net worth section last year (put info on wrong line). It does not affect totals, nor does it affect income statement, Foreign Grantor Trust Owner Statement, or 1040...but it does misrepresent the allocation of values in equity. Should I send an amended return now, or add in with forms being sent for 2014?
Thank you in advance!

Buddy
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Location: British Columbia

Post by Buddy » Fri Feb 20, 2015 4:30 pm

nohairleft:

I don’t know if a trust is strictly necessary even for an “investmentâ€￾ TFSA. The Income Tax Act section cited says essentially that if the institution is in the business of being a trustee, it may hold TFSAs as trusts, without reference to the account contents.

I do see, however, that the “Tangerine Tax-Free Guaranteed Investment (GIC)â€￾ (which I think you are referring to) is structured as a trust (the terms of which provide a good example of typical trust language - to be found about mid-way down the page, under “Declaration of Trust - Tangerine Investment Funds Limited - Tax-Free Savings Accountâ€￾), here:
http://www.tangerine.ca/en/legal/mutual ... index.html

Rather than glorified bank accounts, I would say that TFSAs are bank accounts registered as TFSAs. TFSA “depositâ€￾ accounts may also be structured as trusts, however, so you can't make any assumptions. You must check the terms of your individual TFSA, "deposit" or "investment", to find out whether or not it is structured as a trust.

Whether the paperwork is worth it is an open question, but if you shop around, there are “depositâ€￾ TFSAs at 2.5%, which is a bit more attractive.

Buddy
Posts: 16
Joined: Sun Dec 08, 2013 9:50 pm
Location: British Columbia

Post by Buddy » Fri Feb 20, 2015 5:01 pm

uscannew:

1. Part 1, #5 - the answer is: “Noâ€￾. As very vaguely hinted at in the instructions, in the case of a grantor trust, “another personâ€￾ would be someone other than you, the “ownerâ€￾ (grantor).

2. Page 3, #9 - you are correct, this would be zero for an account closed out during the year.

As far as filing an amended return, it has been my experience so far that as long as the account income is clearly indicated and properly reported on your 1040, the IRS doesn’t seem to bother itself much with other form errors. I’d be surprised if 10% of the forms it receives are filled out entirely correctly. If you want to be conscientious, send a cover letter with your 2014 return (a good idea anyway) mentioning that your 2013 return contained error such and such.

uscannew
Posts: 12
Joined: Thu Mar 06, 2014 11:24 am

Post by uscannew » Sat Feb 21, 2015 12:38 pm

Thanks for the info, Buddy. It will be nice to have this TFSA wrapped up for good!

Potassium
Posts: 39
Joined: Sun Apr 14, 2013 1:26 pm

Post by Potassium » Wed Feb 25, 2015 12:37 pm

Buddy where in part H is the relevant sentence saying the Tangerine TFSA is not structured as a trust?

Is it simply the fact that it doesn't mention the word trust anywhere?

Not filing a 3520 based on the absence of a particular word seems potentially dangerous to me.

[quote="Buddy"]nohairleft:

Yes, the “Tangerineâ€￾ (formerly "ING") TFSA account is not structured as a trust. If you are interested, the terms of that account (Part “Hâ€￾) may be viewed here:
http://www.tangerine.ca/en/legal/accoun ... .html#tfsa

By way of contrast, the account terms of my current TFSA (which IS structured as a trust) are titled “Declaration of Trustâ€￾, and declare: “We agree to accept the position as trustee of the TFSA . . .â€￾ There is nothing remotely similar in the “Tangerineâ€￾ TFSA terms. There is no appointment of a trustee and the word “trustâ€￾ does not appear even once.

A trust relationship with a bank cannot arise out of thin air. Accordingly, 3520/3520-A ask that the “trust instrumentâ€￾ (i.e. the document which created the trust) be attached to the forms. If a TFSA is a trust, that trust instrument will be found within, or appended to, that TFSA’s account terms (to be found on the organisation’s website . . . somewhere).

I do not know why some banks choose to structure their TFSAs as trusts, but it was obviously unnecessary.[/quote]

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