Tax gain harvesting in a TFSA for a US citizen CA resident

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

Moderator: Mark T Serbinski CA CPA

Post Reply
Jonhello
Posts: 59
Joined: Sat Oct 05, 2013 1:28 am

Tax gain harvesting in a TFSA for a US citizen CA resident

Post by Jonhello »

Setting aside whether a 3530 needs to be filed or not, can a US citizen residing in Canada practice tax gain harvesting in their TFSA in relationship to US taxes? If a joint married couple's income is under 80,000 USD, then capital gains are 0%. I am wondering whether this could make a TFSA worth while for a US/Canadian who are in the lower tax brackets. The couple would practice regular tax gain harvesting in the TFSA stepping up the cost basis and not paying taxes on those capital gains.

I understand one will lose foreign tax withholding in a TFSA and also pay on any dividends to the IRS.
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Tax gain harvesting in a TFSA for a US citizen CA resident

Post by nelsona »

Sounds good.'
By the way, why would you lose any US withholding? You simply include it on your return and get it refunded.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Jonhello
Posts: 59
Joined: Sat Oct 05, 2013 1:28 am

Re: Tax gain harvesting in a TFSA for a US citizen CA resident

Post by Jonhello »

"By the way, why would you lose any US withholding? You simply include it on your return and get it refunded."

Good point.

It seems that the TFSA has been deemed in a few latest court decisions as not a trust and not requiring a 3530.

This is seeming to become a more attractive option for me the more I consider it.
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Tax gain harvesting in a TFSA for a US citizen CA resident

Post by nelsona »

Yes, as long as you keep away from PFICs, it becomes pretty straightforward.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Jonhello
Posts: 59
Joined: Sat Oct 05, 2013 1:28 am

Re: Tax gain harvesting in a TFSA for a US citizen CA resident

Post by Jonhello »

One thing that I am trying to figure out is how to report Capital Gains in my TFSA (as well as non-registered USD accounts) to the IRS.

I think I understand keeping track of ACB and its complexities especially with USD conversion needed for USD ETFs. I will use the website adjustedcostbase.ca to help in this and keep things straight for the CRA.

However, when I purchase and sell lots in a TFSA (or even a non-registered account), how do I keep track of the cost basis for the IRS? As far as I understand the Canadian brokerage won't keep track of this for me. Do I just use an ACB equivalent in the TFSA when I report it on filing US taxes?

Also how do I make sure that a capital gain is considered by the iRS as long term as there is no FIFO or trading specified lots in Canada?
I am thinking that I will purchase shares in the TFSA with new contributions and also tax gain harvest at the same time, making sure I trade at least 365 days after the last transaction in the account. I am guessing this will simplify things and would be enough for any sells to be considered long term. Am I missing something?
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Tax gain harvesting in a TFSA for a US citizen CA resident

Post by nelsona »

As witgh any investment account, you jeep track of the costs and the proceeds. The only difference is the costs/proceeds are in USD on that dya(s) they occur, and you need to track long-term an short-term gains.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Post Reply