Holding US Mutual Funds as Canadian

[canadiandeserter]

I understand Americans should not hold foreign mutual funds as they are considered PFICs.

Are there any tax or filing consequences for a Canadian resident (and non-US person) holding US mutual funds in an IRA or HSA?

[nelsona]

US mutual funds and stocks held in US brokerages are considered "specified foreign assets" reportable on T1135. However, if these funds are held in "registered" US accounts, they are not reportable.

IRAs, 401(k), Roth's, are indeed such "exempt" accounts. I am of the opinion, that HSA's also meet that standard, as they meet the same treaty definition of exempt accounts, because, per Article XXI they are for the administration of employee benefits.

[canadiandeserter]

Thanks nelsona! So no difference between holding US mutual funds and ETFs?

While on the topic of T1135, my understanding is that returning residents would need to file form T1135 in the year of the move. If US securities were transferred from a taxable brokerage account in the US to a Canadian brokerage in the year of the move, can they be aggregated in category 7 (since they are held in a Canadian brokerage at the end of the year)? Or would each US security have to be listed in category 2 (since they have been held outside a Canadian brokerage at the beginning of the year)?

[nelsona]

I would use the "beginning of the year" as your arrival date. Only if you held these in your US brokerage at arrival date, treat them as being held as such that year for T1135 purposes.

[canadiandeserter]

My concern is CRA technical interpretation 2015-0611141E5:
https://taxinterpretations.com/cra/seve ... -0611141e5
https://www.wolterskluwer.com/en-ca/exp ... -residents

It argues that the full calendar year should be reported on form T1135, but does not specify whether the property can be aggregated in category 7 if they are held in both US and Canadian brokerages during the year.

[nelsona]

Choose whichever way you are comfortable with.

[canadiandeserter]

Thank you nelsona for your continued help. Two more related questions if you do not mind.

1. On form T1135, should the cost amount be the original purchase price (prior to arrival to Canada) or the market value on the date of arrival (deemed acquisition on arrival)?

2. Are there any tax or filing consequences to holding ETFs or ETNs that generate schedule K-1s without UBTI in an IRA or HSA? My understanding is that the IRA (and HSA?) custodian is responsible for any filing requirements (which should be none if there is no UBTI) for US persons. Is this still the case for non-residents? How about on the Canadian side?

[nelsona]

1. You choose, does it really matter?
2. No

[brianbbc]

Wondering about “cost amount” in filing t1135. Assuming a USA based mutual fund I purchased for $80000 cdn, has now grown to value of $110000 cdn. Am I correct that I do not need to report that on a t1135 as the cost was under $100k. The cra only looks at cost amount and not what it would it would be if I sold it now?