US tax resident, Canada non-resident (RRSP, TFSA, non-reg)

[maverick085]

Hi

I am a Canadian Permanent resident currently living and working in the US. As far as CRA is concerned, I am a non-resident for tax purposes. I have notified my Canadian financial institutions of the non-resident status.

I am looking for some advice on how how to redeem and dispose off my registered (RRSP and TFSA) and non-registered mutual fund accounts in the most tax efficient manner and advice on reporting requirements when filing US and Canadian tax returns.

Here 's a current summary of my portfolio:

1) RRSP: approx 20000$ in 3 RBC mutual funds
2) TFSA: approx 10000$ in TD mutual funds
3) non-registered accounts: TD mutual fund and TD Waterhouse accounts (approx. 10000$ in CDN currency and approx 10000$ in US$ denominated mutual funds)

In addition, I have a questrade brokerage account which only has approx. 500$ in assets (very little) and I am not actively using this account for trading. Once I liquidate the funds in the registered and non-registered accounts and move all liquid assets into a single checking/savings account with one banking institution, I plan to systematically transfer the CDN$ funds to US. I say systematically because, the current rate vis-a-vis CDN$ to US$ exchange is the lowest it has been in a long period and I am prepared to be patient. I eventual goal is to move all funds to the US, but I want to position my investments in Canada in such a way that I continue to earn low-to-moderate returns until I made the transfer. I was hoping to use the Questrade brokerage account for this purpose which is linked to my main financial institution checking account and I plan to hold stable, dividend paying stocks/ETFs in the Questrade brokerage account, which I can sell and redeem at any time.

My plan of action
1. RRSP - I plan to close down my RRSP account. I was debating whether to take the one-time 25% withholding tax hit vs breaking down the RRSP into RRIF (15% withholding tax due to tax treaty), but am leaning towards closing the RRSP completely. For US tax returns, I believe I will only be subjected to RRSP income?

2. TFSA - sell the funds in the TFSA. For Canadian taxes, I believe there are no implications. For US taxes, What part of the investments will be taxable?

3. non-registered (CDN$ and US$ mutual fund investments) - sell the funds in the mutual fund and TD waterhouse accounts. What are the reporting requirements for Canadian and US tax returns. I am assuming this is for capital gains/losses only? How do I avoid double taxation?

Thanks,

[nelsona]

1. I would not bother with converting to RRIF, as only a small portion would be taxable at 15% ($2000), so just collapse.
2. Whether you sell or not the internal income is taxable in US at all times, so selling off would only create new income from the triggering of capital gains from the sales. But get rid of TFSA due to the reporting issues as aell.
3. You need to sell your Cdn mutual funds and you ned to at least move your stocks. Your brokerage account is in essence suspended at this point (since you are US resident). You left Canada, so are subject to departure tax anyways, so that should be all the Cdn tax you owe, and US will accept the departure tax value as your basis for US capital gains.

[maverick085]

Thanks for replying Nelsona and thanks for doing everyone a great service on this forum with your well-informed advice/guidance.

I still had some questions. So just to clarify

- I should cash out the RRSP, pay the 25% withholding tax to CRA. Then to the IRS, I only owe taxes on the capital gains associated with my RRSP assets since the day I became a non-resident and I can also use the 25% withholding tax as foreign tax credit when filing my US tax returns. Is all of this correct?

- For TFSA, I owe taxes on the capital gains and income associated with the TFSA?

- as a US resident and Canadian non-resident, can I maintain a non-registered account in Canada? I have heard TD waterhouse can provide such services since they have brokers/agents who are licensed to deal with US residents. Any other brokerages/firms which can provide such services?

Thanks for all the help. Also, is there a way I can reach you directly, email or phone for tax/investment consultation?

[nelsona]

Your first 2 points are correct. But realize that since so little of your RRSP will be taxable in US, that your tax credit will also be small.

Cdn brokerages can only manage retirement accounts for US residents. Non-sheltered investmant accounts cannot be manged. You need to move your assets toa US brokerage (selling f the Cdn mutual funds, since they cannot be held in a US account).