Joint accounts with income, NRA spouse

[MGeorge]

I can't find a definitive answer on this one, hoping someone can help.
My wife and I live in Canada, I am a US citizen my wife is not.
Realizing that the income in an RESP is taxable on my US return (and needs 3520 reporting)..., am I able to "attribute" only 1/2 of the RESP income to myself? For example, if it generates $100 of government grants and $50 of dividends, do I just declare $50 of grant and $25 of dividends?

Thanks!

[nelsona]

Canada has long had the principlam (and it is described by examples in varuious guides) that income accrued in a joint account is atributed to the contributor.

So, if you make xx% of the contribution, then you make xx% of the income.

Best to have the account in NRA name only. Then no US reporting required.

[Mark T Serbinski CA CPA]

Also, if you elect to file a joint return with your non US citizen wife, you would need to include all FBAR filings etc. for her. Sometimes this election is helpful when "married filing separately" gives rise to AMT.

If you do file MFS, you may also find that even if you include all of the income from an RESP, it may not actually increase your tax, due to the operation of the foreign tax credit.

[nelsona]

FBAR and 3520 filings.

[MGeorge]

Thanks for your help.
I think for now, I will try to treat the account as 50-50, and report my half of the income. Forms 3520 and 3520A seem to let me spell it out that I'm only taking financial responsibility for half the account. I will proceed with this and see if the IRS objects.
Mr. Serbinski - I see that the foreign tax credit is getting me off the hook this year - but I'm starting to use up passive FTC carry forward since I don't have much in terms of non-registered investment income.

[ND]

Mark,

Regarding FBAR, the Treasury Department's Financial Crimes Enforcement Network (FinCEN) states that, in determining whether an individual is a U.S. resident for FBAR purposes, the election under which a nonresident alien married to a U.S. citizen can be treated as a resident for tax purposes is disregarded.

Definition of “U.S. resident.â€￾ FinCEN clarified that, in determining whether an individual is a U.S. resident, the elections under Code Sec. 6013(g) (under which a nonresident alien married to a U.S. citizen or resident can elect to be treated as a resident for tax purposes) and Code Sec. 6013(h) (where a nonresident alien who becomes a U.S. citizen or resident before the close of the tax year and is married to an individual who is a U.S. citizen or resident on the last day of that tax year is treated as a citizen for the entire year) are disregarded.

source:
DEPARTMENT OF THE TREASURY
Financial Crimes Enforcement Network
31 CFR Part 1010
RIN 1506–AB08
Amendment to the Bank Secrecy Act
Regulations—Reports of Foreign
Financial Accounts
AGENCY: Financial Crimes Enforcement

exact text:

Commenters also sought clarification
about the interaction of elections under
section 6013(g) and (h) of the Internal
Revenue Code and the definition of
resident. FinCEN wishes to clarify that
the determination of whether an
individual is a United States resident
should be made without regard to
elections under section 6013(g) or
6013(h) of the Internal Revenue Code.
Network (FinCEN), Treasury.
ACTION: Final rule.

[MGeorge]

Hi ND,

Thanks for this information - this is helpful. Many may starting filing jointly with an NRA spouse because of the net investment income tax.

So the election to have an NRA spouse treated as a "resident alien" for tax purposes gets her out of FBAR. What about 3520 and the FATCA form 8938?

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[cullen]

Can you supply a link to this ruling?



ND wrote:
> Mark,
>
> Regarding FBAR, the Treasury Department's Financial Crimes Enforcement
> Network (FinCEN) states that, in determining whether an individual is a
> U.S. resident for FBAR purposes, the election under which a nonresident
> alien married to a U.S. citizen can be treated as a resident for tax
> purposes is disregarded.
>
> Definition of “U.S. resident.â€￾ FinCEN clarified that, in determining
> whether an individual is a U.S. resident, the elections under Code Sec.
> 6013(g) (under which a nonresident alien married to a U.S. citizen or
> resident can elect to be treated as a resident for tax purposes) and Code
> Sec. 6013(h) (where a nonresident alien who becomes a U.S. citizen or
> resident before the close of the tax year and is married to an individual
> who is a U.S. citizen or resident on the last day of that tax year is
> treated as a citizen for the entire year) are disregarded.
>
> source:
> DEPARTMENT OF THE TREASURY
> Financial Crimes Enforcement Network
> 31 CFR Part 1010
> RIN 1506–AB08
> Amendment to the Bank Secrecy Act
> Regulations—Reports of Foreign
> Financial Accounts
> AGENCY: Financial Crimes Enforcement
>
> exact text:
>
> Commenters also sought clarification
> about the interaction of elections under
> section 6013(g) and (h) of the Internal
> Revenue Code and the definition of
> resident. FinCEN wishes to clarify that
> the determination of whether an
> individual is a United States resident
> should be made without regard to
> elections under section 6013(g) or
> 6013(h) of the Internal Revenue Code.
> Network (FinCEN), Treasury.
> ACTION: Final rule.

[cullen]

Nevermind- I found it :)
IRM 4.26.16.3.1.2


cullen wrote:
> Can you supply a link to this ruling?
>
>
>
> ND wrote:
> > Mark,
> >
> > Regarding FBAR, the Treasury Department's Financial Crimes Enforcement
> > Network (FinCEN) states that, in determining whether an individual is a
> > U.S. resident for FBAR purposes, the election under which a nonresident
> > alien married to a U.S. citizen can be treated as a resident for tax
> > purposes is disregarded.
> >
> > Definition of “U.S. resident.â€￾ FinCEN clarified that, in determining
> > whether an individual is a U.S. resident, the elections under Code Sec.
> > 6013(g) (under which a nonresident alien married to a U.S. citizen or
> > resident can elect to be treated as a resident for tax purposes) and Code
> > Sec. 6013(h) (where a nonresident alien who becomes a U.S. citizen or
> > resident before the close of the tax year and is married to an individual
> > who is a U.S. citizen or resident on the last day of that tax year is
> > treated as a citizen for the entire year) are disregarded.
> >
> > source:
> > DEPARTMENT OF THE TREASURY
> > Financial Crimes Enforcement Network
> > 31 CFR Part 1010
> > RIN 1506–AB08
> > Amendment to the Bank Secrecy Act
> > Regulations—Reports of Foreign
> > Financial Accounts
> > AGENCY: Financial Crimes Enforcement
> >
> > exact text:
> >
> > Commenters also sought clarification
> > about the interaction of elections under
> > section 6013(g) and (h) of the Internal
> > Revenue Code and the definition of
> > resident. FinCEN wishes to clarify that
> > the determination of whether an
> > individual is a United States resident
> > should be made without regard to
> > elections under section 6013(g) or
> > 6013(h) of the Internal Revenue Code.
> > Network (FinCEN), Treasury.
> > ACTION: Final rule.