Hello:
I understand that Canadian holders of a Roth IRA must declare with CRA by the end of April that they wish to continue to have their gains non-taxable. What if I am looking to convert my IRA's to Roth after the end of April. How does that/will it effect me? Thanks.
Roth IRA Declaration for Canadians, End of April
Moderator: Mark T Serbinski CA CPA
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Canadabound
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Absolutely DO NOT convert any money into a Roth once you live in canad. It will basically break the Roth, making it immediately and forever taxable in Canada.
Roth conversions should ONLY be done while living in US.
Roth conversions should ONLY be done while living in US.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
An individual moved to Canada in 2009 and had a Roth IRA. In 2010, they inadvertently had an automatic contribution to a Roth IRA from one of their accounts (an automatic contribution was set up and they forgot to change it). I understand that for 2010 and on a going forward basis, his Roth IRA's are going to be taxable in Canada. He did not declare the Roth IRA in 2009, but we intended to do so by the end of April 2011 per the provision. He did not report any income earned by his Roth IRA in Canada in 2009. Should they still make the declaration to have it in effect from the time of arrival to the end of 2009?
Unfortunately, he has broken the Roth in Cdn terms, since this clause was in effect since before that date.
Figure it out and let us know....
Figure it out and let us know....
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Update: Based on my research and discussions with an agent at the Competent Authority (she did sound competent), an election can and should still be filed in order to formally permit the deferral to the date of the first Canadian Contribution. Unfortunately, after a bit more digging, it turns out that my client made a contribution exactly one day after establishing residency in Canada (doh!). Therefore, he may not benefit from making an election. I'm still waiting for a response from the rulings department about whether the election recognizes the FMV at the date of entry into Canada, or if the original cost must be considered (ie. whether all gains are deferred or only those that have been realized prior to that date). The latter, of course, would effectively mean that the taxpayer would be liable for income tax on any appreciation in value while a non-resident.
A bit of an exercise in futility, to get one day's accrual tax-free.
the intent and wording of the treay make it clear that the acretions (that is income from after the Cdn contribution are what will be taxed.
the intent and wording of the treay make it clear that the acretions (that is income from after the Cdn contribution are what will be taxed.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
"A bit of an exercise in futility, to get one day's accrual tax-free."
You're right. I was mistakenly though that he'd still be able to avoid the tax on any unrealized gains to the date of entry into Canada by filing the election.
To illustrate:
A US resident invests $10k into XXX fund within his Roth IRA on Jan 1, 2010.
On June 30, 2010, he establishes residency in Canada.
The value of the XXX fund on June 30, 2010 is $15,000.
On July 1, 2010, he puts $1 into his Roth IRA (he didn't speak with his accountant first).
By April 30, 2011, he makes the election effective June 30, 2010 (which he inadvertently "broke" the next day).
On December 31, 2010, he sells XXX fund within the Roth IRA for $18,000.
I figured that without the election, he may be taxed on the full $8,000 rather than the $3,000 gain by filing the election.
It then dawned on me that he'd only be responsible for the gain from the FMV on the date of entry anyway (ie. $3,000). Therefore, no election would be necessary.
You're right. I was mistakenly though that he'd still be able to avoid the tax on any unrealized gains to the date of entry into Canada by filing the election.
To illustrate:
A US resident invests $10k into XXX fund within his Roth IRA on Jan 1, 2010.
On June 30, 2010, he establishes residency in Canada.
The value of the XXX fund on June 30, 2010 is $15,000.
On July 1, 2010, he puts $1 into his Roth IRA (he didn't speak with his accountant first).
By April 30, 2011, he makes the election effective June 30, 2010 (which he inadvertently "broke" the next day).
On December 31, 2010, he sells XXX fund within the Roth IRA for $18,000.
I figured that without the election, he may be taxed on the full $8,000 rather than the $3,000 gain by filing the election.
It then dawned on me that he'd only be responsible for the gain from the FMV on the date of entry anyway (ie. $3,000). Therefore, no election would be necessary.
I am not sure if you are speaking only about IRA's. But for ordinary after-tax accounts, TD Waterhouse was happy to set up investment accounts for me and my wife. We are dual US-Canada citizens, and moved from the US to Canada in June 2010. We did have to supply both SIN (Canada) and SSN (US) numbers, and fill out some extra forms because of the US citizenship.