Several Questions from someone moving to the US again

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Several Questions from someone moving to the US again

Post by mikefitz » Fri Jan 18, 2013 4:32 pm

Hi there - I posted on here several years ago when I was returning to Canada from the US and it was very helpful to receive valuable info from nelsona. I'm hoping to be able to run a few things by you again.

First - a summary of the situation:

I'm a Canadian citizen and lived in the US after graduation from a Canadian school. I was under a TN visa, and had cut ties with Canada for tax purposes. When I returned several years ago, I re-established ties. In the US, I have a Roth IRA, which I converted from Roth before returning as per the good advice of nelsona. There have been no subsequent contributions and this Roth still sits in the US and I actively trade it....

I am now returning to live in the US due to another job. I will again be on TN visa. Also, my fiance will be staying back for a few months while she figures out her job transfer, which will likely happen. We have never filed together in Canada but last year I suppose we could have been considered common law (been together a long time). Our wedding is happening in Canada this summer. Also, this time around, as I'm not fresh out of school, I have more belongings etc which will be moving down with me, but these will follow over the next few months after she moves down.

In Canada I have an RRSP and so does she. I haven't contributed to it in the past 2 years so i have probably 2 years of max contribution room to put in before I leave if I want to. She has quite a bit of room too.

I maintained all my bank accounts and credit cards in the US (it was always a possibility that I moved back). I would like to maintain Canadian bank accounts and cards for convenience.

I own no real estate in Canada or publicly traded securities (other than those in registered accounts, including TFSA, which I know I have to deal with in a special way while in the US as per the posts on this forum).

I do have a holding corporation that I have used to make some investments. Right now, it's clean and there is nothing in it other than some cash. I am 100% owner of it.

I have been renting in Canada. All our belongings will come with us.

The way I would characterize this move is "indefinite". I don't know where things will take us - we may or may not be back in Canada. For purposes of the TN, certainly the intent is not to immigrate to the US. But we will see what happens... my sense is if everything works out fine we'd be happy out of Canada for the long term... whether that's the US or elsewhere, so be it.

Now for the questions:

I get the sense that it might be tough for me establish that ties with Canada are being cut as of my move date over the next few weeks, and rather that it will more likely to be something I can establish after the wedding this summer and once my fiance has moved down to the US. Would you agree? Or do you think I can establish the ties were cut when I leave even though she is here and wedding is here? As I mentioned, we've never filed together. Also, when ties are cut halfway through a tax year, does that mean my emigration date is that day and therefore I owe some of my US earnings to Canada for the year and then post the cutting of ties, just to the US?

Also, I wouldn't mind keeping my OHIP coverage for a few months (if I tell the OHIP office that there is an intention to return to Ontario over the next 2 years, which in theory there is as of now, then I know I can extend it). I also understand that once it becomes clear that there is no intention to return, I can file a change of status form. I bring this up because I know on Form NR-73, there is a question of whether I am still covered under a healthcare plan in Canada. Staying with OHIP will also allow me to stay on my finance's extended benefit plan for a few more months, which is helpful. So the question here is, will being on OHIP and then switching off of it in a few months put in jeopardy my eventual desire to cut taxes?

With respect to my Roth IRA in the US, now that I am back down there can I start contributing to it again? I know we need to be careful to not contribute while a resident of Canada, but when I am back in the US does it unfreeze? Can it be done within the same account with the broker or should I establish I separate Roth IRA account with another bank to keep things clean? Also, I have a tiny residual SEP-IRA sitting there. Once I am in the US can I convert this to Roth at that time? Should I wait until I am a US tax resident?

For the RRSP in Canada, I've read through the board and I understand that I can keep having taxes deferred on this and then one day if I come back everything will be fine. And if not, I just take distributions and pay 25% to Canada and residual to wherever I live. So I guess that's fine. Just trying to decide whether to go ahead and make my full contribution and max it out before I leave - might as well to get a bunch of money back now and then leave the RRSP funds in there... only issue is I understand that you can't buy securities from your rrsp once you are not a resident - you can only sell and then it stays cash. So could be a big opportunity cost if cash just sits there for many years. Might have to put all the money in a diversified fund and hope for the best, with the one time option to sell if I really feel I want to.

Regarding my holding corporation, I'm really not sure what to do there. I know there will be a deemed disposition triggered but there wouldn't be a gain to report there. Investments in it resulted in a loss overall etc... so just trying to figure out how to do all that. And will having the ownership of the holding corporation make it harder to break the tax ties? Would be nice to keep it dormant while not here or maybe use it at some point to make investments while not living in Canada. But at a minimum, just trying to understand how I should establish the value of the corp for purposes of the deemed disposition.

That's it for now - I guess this is a bit long but I'm just finding all this to be a bit tricky given my personal circumstances of returning to the US again and doing so during a year where it's hard to immediately cut ties... but I'm hoping to do so in short order for a variety of reasons.

I'm going to very likely schedule a tax consultation with Serbinski. I don't think I should tackle these situations on my own this year. The only problem is I am very short on time to make certain decisions before I leave Canada and it looks like Serbinski would be in tax season right now so I am not sure if they will be able to get on the phone soon to go through all this. But I am going to give it a try.

Thanks very much in advance for your help (a second time around).

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Post by nelsona » Fri Jan 18, 2013 10:25 pm

Log post... too long.

get rid of TFSA, you can always replenish when you move back.

You can fund RRSP this year if it gives you a tax deduction, otherwise why bother. Same in future years.

TD waterhouse allows trading while in US.

You will become US resident and Cdn non-resident the day you move to US.

You will not have to file NR73. You will be living in US and not in canada. period.

You can resume funding Roth when you are clearly in US.

Get rid of holding corp.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Phil Hogan, CA
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Post by Phil Hogan, CA » Sun Jan 20, 2013 3:36 pm

We should start a tip jar for Nelsona.....

Phil Hogan, CA, CPA (Colorado)
Canadian and US Income Tax
Victoria BC

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Post by JGCA » Mon Jan 21, 2013 7:41 pm

Agreed, I would not even attempt to read such a long post.

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