Hello,
My name is a George and I am very grateful for all of the invaluable information found on the forum. I am in a situation myself and would really appreciate some guidance.
Here is my situation:
I am married to a US citizen, passed the Green card interview in May, 2021 and just entered San Diego, California 10 days ago on October 21, 2021 (just received my SSN and waiting for my Green Card in the mail). By doing some research I now realize that I am in trouble for taxes in my TFSA account, which is holding US and CAD stocks and is currently sitting with about $160K USD of unrealized capital gains. That is all gains I was planning to realize tax free and use for a down payment for a home for my family (have an 18 month daughter as well). By doing research I now realize that I should have realized my gains and closed my TFSA before I entered the USA which was only 10 days ago as, according to the IRS website, I am now considered a US tax resident. I would really appreciate some advice as to how to deal with my TFSA unrealized capital gains, which by the way are all long-term (still facing about 25% federal and state tax, which would be a substantial amount, as opposed to paying $0 tax had I liquidated TFSA 10 days ago. I am extremely mad at myself for not doing this research and sold my TFSA stocks before I entered the USA). So here are some of the questions I have, where I would greatly appreciate if someone could provide some advice:
1) What would be the best course of action for me to deal with my TFSA unrealized long-term unrealized gains in order to avoid or minimize taxation (I hope there are some alleviating terms for newcomers)?
2) Does it make sense for me to file a dual tax return as married filing separately and if yes, would I only report my income for period Oct 21 - Dec 31, 2021 (I will still be receiving employment income from Canada only until the end of the tax year), which small income would allow me to shield a realized capital gain (I could sell some stock and come close to $25K capital gain for 2021) at 0% capital gain federal tax (my taxable income for Oct-Dec 2021 period would be about $15K USD, so I should be able to shield $25K USD from federal capital gains tax as the threshold is $40K taxable income at 0% tax) Is my thought process right or not?
3) If my thought process is right, in 2), then how should I handle the the remaining $135K unrealized capital gain in my TFSA going forward next year?
4) How should I report the TFSA at year end (I know the forum suggests that I do not claim TFSA as a foreign trust and "avoid forms 3520 and 3520-A like the plague") Or should I liquidate everything and close TFSA asap, thereby realizing a significant capital gain and paying a ton of capital gain taxes?
5) Is there a way around this TFSA nonsense and is there any possible loopholes or elections that can be filed so that I can avoid paying taxes on my TFSA capital gains (can I somehow go back in time and liquidate the TFSA so capital gains are out of reach for the IRS? Or could I just liquidate my stocks now, realize the gains and move the funds to my unregistered trading account without telling the IRS about the capital gains??? Is there a chance they would not find out about the capital gains? What would be the consequences if they did? Wouldn't I just get reassessed?
6) I also sold my house in Canada a month ago, however the closing date on the sale is November 1, 2021 (this Monday), where technically I have become a US resident for tax purposes on October 21, 2021. So, would I have to report the gain on the house on my 2021 US tax return and would I be taxed on that capital gain? (I sure hope not as that was our principle residence and would be tax free in Canada?
7) I am planning to put the funds from my house in my Questrade (Canadian platform) unregistered account, buy some stocks, and wait and possibly make some profits by the time we are ready to purchase our home. Can I still use a Canadian brokerage Questrade and invest in CAD or should I convert CAD to USD and open up a US brokerage account?
8) It is my understanding that there would be a deemed disposition for my stocks in my unregistered account on the day of entry to USA (i.e. Oct 21) So I have to file a departure return according to my understanding and pay Canadian tax on the capital gains. And then the new cost basis for my stocks on my US return would be the FMV of my stocks on Oct 21 right? Is there a deemed disposition for my TFSA stocks (I read that there is no such thing for TFSA, please confirm) ?
9) When I make CAD-USD conversions for estimates to use in different tax scenarios, such as my Canadian income for example, which CAD-USD rate should I use?
10) Do you think I need the services of an International Tax Attorney? If Yes, could you please recommend a good one. I am in San Diego, California so maybe someone in the surrounding area who deals with California and Canadian taxes.
I am really concerned about the TFSA situation so I would truly appreciate any help or guidance in the matter so I make the best financial decision for my family. I am extremely frustrated for not researching this ahead time and the thought that I could have avoided all of this and possibly saved $40K USD if I had just acted 10 days ago is eating me alive.
My sincere apologies for the really long post. I wanted to just reach out to this great community, voice out my issues and concerns, and most of all seek much needed help.
Thank you all in advance for your help! Any input would be greatly appreciated!
George and Family
TFSA and Capital Gains. Please Help.(Canadian moved to USA)
Moderator: Jim Eiss
Re: TFSA and Capital Gains. Please Help.(Canadian moved to USA)
georgeata wrote:
> Hello,
>
> My name is a George and I am very grateful for all of the invaluable
> information found on the forum. I am in a situation myself and would really
> appreciate some guidance.
>
> Here is my situation:
>
> I am married to a US citizen, passed the Green card interview in April 2021
> and just entered San Diego, California In November 2021
> (just received my SSN and waiting for my Green Card in t). By doing
> some research I now realize that I am in trouble for taxes in my TFSA
> account, which is holding US and CAD stocks and is currently sitting with
> some unrealized capital gains. By doing research I now realize
> that I should have realized my gains and closed my TFSA before I entered
> the USA according to the IRS website, I am
> now considered a US tax resident. I would really appreciate some advice as
> to how to deal with my TFSA unrealized capital gains, which by the way are
> all long-term (still facing about 25% federal and state tax, which would be
> a substantial amount, as opposed to paying $0 tax had I liquidated TFSA 10
> days ago. I am extremely mad at myself for not doing this research and sold
> my TFSA stocks before I entered the USA). Any thoughts?
> Hello,
>
> My name is a George and I am very grateful for all of the invaluable
> information found on the forum. I am in a situation myself and would really
> appreciate some guidance.
>
> Here is my situation:
>
> I am married to a US citizen, passed the Green card interview in April 2021
> and just entered San Diego, California In November 2021
> (just received my SSN and waiting for my Green Card in t). By doing
> some research I now realize that I am in trouble for taxes in my TFSA
> account, which is holding US and CAD stocks and is currently sitting with
> some unrealized capital gains. By doing research I now realize
> that I should have realized my gains and closed my TFSA before I entered
> the USA according to the IRS website, I am
> now considered a US tax resident. I would really appreciate some advice as
> to how to deal with my TFSA unrealized capital gains, which by the way are
> all long-term (still facing about 25% federal and state tax, which would be
> a substantial amount, as opposed to paying $0 tax had I liquidated TFSA 10
> days ago. I am extremely mad at myself for not doing this research and sold
> my TFSA stocks before I entered the USA). Any thoughts?
Re: TFSA and Capital Gains. Please Help.(Canadian moved to USA)
you need to post this on the tax forum BUT MUCH SHORTER POST.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing ![Very Happy :D](./images/smilies/icon_biggrin.gif)
![Very Happy :D](./images/smilies/icon_biggrin.gif)