Clarification on capital gains within Canadian Mutual Funds
Moderator: Mark T Serbinski CA CPA
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- Posts: 19
- Joined: Mon Jun 27, 2011 2:10 pm
Clarification on capital gains within Canadian Mutual Funds
I am one of the "accidental Americans", born in the US but have lived all my life in Canada, just discovering the requirement to file US tax returns.
I have been reading through the material provided in this forum - many thanks to the folks who have contributed over the years. I am hoping to get onside with the IRS by filing returns for the past few years, and am experimenting with TurboTax to produce a return for 2010.
One area that I am not clear about is to how to handle Canadian mutual funds that are not RRSP's. I have several TD funds that reinvest their income as reinvested dividends throughout the year, and issue a T3 for that income. I understand that income is declared on form 1099. The fund's net asset values also increase as the value of the underlying assets increase, but no actual capital gain is triggered unless the fund sells some assets and distributes (reinvests) a capital gain (and identifies that on the T3); or when I sell the mutual fund and calculate the gain based on my adjusted cost base. Is the capital gain therefore only recognized on a US tax return when the fund is sold or has a CG distribution, or is the unrealized CG calculated annually through form 8621 and declared as income each year?
I have been reading through the material provided in this forum - many thanks to the folks who have contributed over the years. I am hoping to get onside with the IRS by filing returns for the past few years, and am experimenting with TurboTax to produce a return for 2010.
One area that I am not clear about is to how to handle Canadian mutual funds that are not RRSP's. I have several TD funds that reinvest their income as reinvested dividends throughout the year, and issue a T3 for that income. I understand that income is declared on form 1099. The fund's net asset values also increase as the value of the underlying assets increase, but no actual capital gain is triggered unless the fund sells some assets and distributes (reinvests) a capital gain (and identifies that on the T3); or when I sell the mutual fund and calculate the gain based on my adjusted cost base. Is the capital gain therefore only recognized on a US tax return when the fund is sold or has a CG distribution, or is the unrealized CG calculated annually through form 8621 and declared as income each year?
Income is declred on form 1040. 1099 doesn't apply here since these are Cdn firms. You simply report the various incomes direcrly on your return.
Interst, cap gains, and dividends.
8621 is for specific types of mutual funds. You still need to report the income on your return.
Interst, cap gains, and dividends.
8621 is for specific types of mutual funds. You still need to report the income on your return.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
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- Posts: 19
- Joined: Mon Jun 27, 2011 2:10 pm
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- Posts: 19
- Joined: Mon Jun 27, 2011 2:10 pm
Sounds like there is some "room for interpretation" as to whether a Canadian MF is a PFIC? Any resources or guidance on that question that anyone can point to, or precedents?
Would it be practical to catch up on my back reporting on 1040's and FBAR's for 3 years now assuming that the MF's are not PFIC's, and let the IRS come back and tell me that they should be PFIC's and need 8621's? I did do a quick test and it looks like even if I take the undistributed capital gains as "other income" that I do not owe any tax, so would it be "safer" to just file the 8621's anyway?
Would it be practical to catch up on my back reporting on 1040's and FBAR's for 3 years now assuming that the MF's are not PFIC's, and let the IRS come back and tell me that they should be PFIC's and need 8621's? I did do a quick test and it looks like even if I take the undistributed capital gains as "other income" that I do not owe any tax, so would it be "safer" to just file the 8621's anyway?
The mutual funds might pay out, but what about the components?
In any event, these rules are changing yearly as IRS aggressively seeks out foreign income.
For example, last year MFs in RRSPs were exempt from these rules, not this year.
In any event, these rules are changing yearly as IRS aggressively seeks out foreign income.
For example, last year MFs in RRSPs were exempt from these rules, not this year.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing