First year CAN/US Tax Return with PFICs

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molediver123
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Joined: Tue Mar 18, 2025 10:50 pm

First year CAN/US Tax Return with PFICs

Post by molediver123 »

I'm a Canadian citizen that moved to the US on Jan 27, 2024 for work and when filing my 2024 tax returns I realized I left myself a mess to deal with. I was hoping the people of this forum can provide some guidance and review my plan to address things.

[Background]
I moved from Canada to the US on Jan 27, 2024. I plan to file a 1040 as a US resident and a Departure return for Canada. Before I left, I emptied out my TFSA but left my non-registered account open with Canadian ETFs and some stocks. I also forgot to notify the brokerage that I left Canada, so they issued me a T5 and a T3 for 2024, causing more issues. I am now trying to remedy the situation to the best of my ability and set myself up to sell my Canadian funds in 2025 as to not deal with this for 2026 taxes and beyond.

The following is my plan, and I also have some questions at the end. Thank you for your patience in advance.

[Canada]
- File a departure tax return
- Fill out forms T1161 and T1243 for deemed disposition on my shares and pay whatever capital gain tax I owe
- Send a letter alongside my return and include payment for 25% withholdings that should have applied to the dividends I received after I left Canada
- Inform my brokerage that I have left Canada to avoid future T5 and T3 slips

[USA]
- File a 1040 as a US Resident
- Include form 8938 for FATCA and file FinCEN Form 114 online to list my brokerage account
- File 8833 to invoke Rev Proc 2010-19 Article XIII(7) to step up the ACB of my ETFs and stocks due to deemed disposition to Canada (attaching T1243 as proof)
- File 8621 for each PFIC fund I hold (they all provide AIS) and elect QEF election A since this is the first year I owned the PFIC as a US resident. I believe that also due to RP 2010-19, my cost base for these PFICs will be updated to FMV of my departure day?

[Tax Year 2025]
- I plan to sell all my positions in Canada and move the money to the US. I will pay capital gains tax to the US based on the QEF PFIC ACB. Do I need to pay anything to Canada?

Does this sound reasonable as a plan? Am I missing or incorrect in anything here? I also have a few questions:

1. Am I correct in my assumptions of QEF election on the PFICs? One being that there is no tax on prior unrealized gains since this is my first year as a US tax resident holding these PFICs allowing me to opt straight for election A with my Canada departure day as the buy date? Two being that from RP 2010-19 I can also claim the FMV value I reported on T1243 as my ACB?

2. When I sell my positions in tax year 2025 as a non-resident of Canada, is there anything owed to Canada from gains after my deemed disposition? And for the US, it would be treated as capital gains based off the ACB calculation at the date of sale?

3. Does any tax treaty apply to either 2024 deemed disposition capital gain tax (Tax to Canada, credit in USA) or in 2025 if I owe capital gains tax from the sale of my ETFs, applying it to the capital gains I must report to the US?

Thank you again for your patience and help. I can provide clarification for anything about my situation if not clear.
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