Canadian Moved to the US.. Canadian Brokerage account issues

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Canadabound
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Canadian Moved to the US.. Canadian Brokerage account issues

Post by Canadabound »

My mom (Canadian citizen/resident) is moving to the US later this year. She is retaining a Canadian address, and is planning on using it for her investment (non-RRSP) account. If she receives interest and dividends from the investments, but does not pay any witholding taxes (the authorities think she is Canadian resident), what happens, eventually? Does she ever have to pay it? Could it cause her problems? What if she dies? Probate in both countries? I think she's making a big mistake.
Will it/can it cause me issues as her sole benficiary?
nelsona
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Post by nelsona »

She should not play this game. She's moved to US, she MUST advise he r brokerage and her bank.
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Canadabound
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Post by Canadabound »

I agree that she should not do this, but was wondering if anyone knew the ramifications so I can further convince her that the issues would be costly/severe
nelsona
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Post by nelsona »

Cdn brokers are not allowed to deela with US residents outside RRSPs. Period.

She would also need to report deemed disposition upon departure, and failure to do so is subject to fine, plus interest and penalties.

if you are the executor, it wil be a big headache for you.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Canadabound
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Post by Canadabound »

I think that I understand. The (tax) year of her new US residency, she basically is deemed to have "sold" (for tax purposes) all her cash account investments and paid any necessary taxes in Canada.. stepped up the cost basis, so to speak. Is that correct?

Secondly, going forward if she owns, let's say $2mm of stocks and bonds in a Canadian brokerage account, and the securities generate $50,000 of interest and dividends each year. She is claiming the income on her US taxes, but there is no Canadian witholding as Canada thinks she is still a Canadian resident. Do they (CRA) typically come after these now US residents for the witholding tax on Canadian-sourced income that was never witheld? Is that yet another risk (not that there are not enough already!!).
nelsona
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Post by nelsona »

Well, IRS will not accept the stepped-up basis unless she actually has filed the deemed disposition with her Cdn depature return. The new procedure for stepping up the basis requires this submission.

Second, failure to report her holdings at departure (regardless of profit or loss) will incur a penalty in canada.

As a non-resident, she will be subject to flat NR tax on and dividends. It would be less than what she would owe if she files as a resident.

CRA WILL deem her non-resident to get the deemed dispo tax at some point, and will be sure to get their share of any Cdn-sourced income along the way.

her brokerage will eventually demand that she close her account becuase of the regulatory jepo[ardy she is placing them in.


Just convince the old .... to file as departing resident.
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nelsona
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Post by nelsona »

To answer your question though, if she fails to decalre herself non-resident, and decides instead to file her taxes as a resident (surely she didn't think that she could pretend not to leave, but not report in canada), she will pay her taxes with her return. If the ammount owed is subastantial enough, they will put her on quarterly payments the folowing year (then she would have interest).
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Canadabound
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Post by Canadabound »

Thank you very much, very informative
nelsona
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Post by nelsona »

One thing that might convince her to go non-resident is that, if she becomes US-resident, her OAS (is she maybe afraid she won't get OAS?), will not be subject to clawback and will not even be subject to Cdn tax (along with CPP).
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Canadabound
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Post by Canadabound »

No, I think that it is just inertia. She has had the same broker for 30 years and doesn't want to switch. He's telling her that she will not be able to hang on to all of her Canadian stocks and mutual funds if she moves. Feathering his own nest, a bit, not real objective advice.
nelsona
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Post by nelsona »

So, since he knows she is leaving the country, he rather break securities regs.... in non-retirement accounts it is against the regs to make a trade for anyone even physically outside the country at the time of the call ... priceless.

btw, she can still break residency and forget to tell the broker. If he is so willing to paly fast and losse with the regs, she should at least use it to her advantage.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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