Transfer to TFSA - potential double taxation???

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lanman2000
Posts: 137
Joined: Wed Jul 29, 2009 8:30 am

Transfer to TFSA - potential double taxation???

Post by lanman2000 »

Dual US/ Canada citizen residing in Canada.

In 2019 I bought 1000 shares of an ETF in canadian brokerage account in for total of $46,000

In 2021 I transferred these shares to a TFSA when they were worth $65,000.

Transfer to TFSA is a deemed disposition so capital gain of $19,000 (65000-46000) was reported on T5008. Paid tax to Canada in 2021.

Filling out US return though they don't see the transfer as deemed disposition so there is no capital gain and no tax and this nowhere to put the Canadian taxes paid.

If I actually sell these shares in the future then the US is going to want to tax the capital gain. This will be double taxation won't it!!?? Or is there some way I can carry forward the Canadian taxes paid??

Any help is much appreciated. Can't imagine I'm the first to face this scenario.
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Transfer to TFSA - potential double taxation???

Post by nelsona »

What you describe is correct.
So, you need to report the taxes paid on a 1116 in the year you [ay it, even if there is no income, and you get to carryforward that tax for 10 years.

Make sure you actually sell the stock within 10 years.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Transfer to TFSA - potential double taxation???

Post by nelsona »

This transaction (and the proportion of your CDn income tax) goes in with all your other foreign passive income and tax that you report on your US taxes each year via form 1116 (passive). Hopefully, in the year you sell that stock within your TFSA (with no Cdn tax) you will have sufficient build up of Cn tax carried forward and be able to use most if not all of it up to negate any US tax.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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